The most utilized blockchain network is facing problems from a familiar foe in the form of gas fees.
Gas Fees Spike Again
The average price of transactions on the Ethereum Network have risen by nearly three times as ETH took a price jump.
Transaction prices have moved from an initial $2.37 per transaction on Oct. 3 to $6.44 per transaction on Oct. 5 as per data charted out by ycharts.
“Things like bitcoin are inherently built to be a digital form of money or a store of value. Whereas things like ethereum are meant to be more of a gas to power decentralized applications, and the list goes on and on.” explained Michael Sonneshein, CEO of Grayscale Investments in Yahoo Finance’s All Markets Summit Plus: Crypto Investing.
Even though the fiscal amount might not sound as much on paper, it’s noteworthy that this is the average gas price on a given day and that fees have multiplied in such a short duration. However, this is not the first spike seen in recent weeks. Gas prices on Ethereum witnessed two enormous spikes that resulted in 5-month highs. On Sep. 7, this metric hit an average of $21.29 per transaction, and on Sep. 27, it hiked, even more, to hit the 5 month high of $25.43.
Despite the high utility that the Ethereum network proposes to the blockchain industry, the issue of high gas fees has been plaguing the network ever since the congestion has been increasing. In the attempt to transition to a proof of stake (PoS) consensus mechanism from the existing Proof of Work (Pow) model, Ethereum has established the Beacon Chain that introduces proof-of-stake to the blockchain network. In August this year, the Eth2.0 staking contract became the largest ETH address surpassing the wrapped Ether contract.
London Hard Fork Savior?
The Ethereum network underwent a major upgrade to the network on Aug. 5 with the deployment of the London hard fork. The hard fork brought in 5 Ethereum Improvement Proposals (EIPs) to the network, namely, EIP-1559, EIP-3554, EIP-3541, EIP-3198, and EIP-3529.
The most highly anticipated amongst these is the EIP-1559, which includes a change in the transaction pricing mechanism that reduces the inflation rate of ETH tokens drastically. This proposal entailed a fixed per-block network fee that is burned and includes the expansion and contraction of block sizes in a dynamic fashion to manage the increasing congestion on the network. It also brought in a tipping mechanism that allows users to ‘tip’ miners in order to prioritize their transactions.
As a result of this burning mechanism, to date over 463,595 ETH, i.e. over $1.65 billion, worth of Ether tokens have been burnt according to data from Watchtheburn. The net reduction in this duration has been 54.69%, which means that more than half of ETH issuance has been reduced as a result of EIP-1559. Once this metric crosses 100%, there will be more ETH burned than issued, thus, making ETH “ultrasound money.”
However, apart from these optimistic scenarios, it doesn’t seem like the gas issue is resolved just yet as an aftermath of the London upgrade. The ecosystem is waiting with bated breath for the complete transition to PoS, however, it doesn’t seem like it’s just around the corner as there is no specified date for this landmark move. As the gas price woes continue for Ethereum, other smart contract networks like Binance Smart Chain (BSC), Solana (SOL), Avalanche are seeing increasing user adoption and quickly rising total value locked (TVL) figures all around.
In a highly publicized gas fees debacle, the crypto exchange Bitfinex accidentally paid 7,677 ETH, i.e. $27.5 million as gas fees for a $100,000 Tether (USDT) on the Ethereum network. However, since it was obviously a “fat finger,” the miner turned out to be a good samaritan and hence, agreed to return these fees.
Ethereum is one of the most prominent blockchains in the digital asset industry. In fact, it is currently the most utilized blockchain for a range of purposes like Decentralized Finance (DeFi), NFTs, and even layer-2 solutions tailored for the network like Polygon. It is one of the first networks to bring smart contracts for the fore in the cryptoverse, on which most of the DeFi markets are currently functioning. Its native token, Ether (ETH), has a market capitalization of $422.7 billion that is only second to that of Bitcoin (BTC).
Source ; solana.news