Transaction fees on the Ethereum network recently hit a new hourly record. according to Glass knot, a chain analysis company, Miners on the network made more than $ 500,000 in just one hour today as ether (ETH) recovered.
Currently at its 2020 high of $ 486, Ether is up 10% today. It is believed that the increase in network activity is related to the start of Sushi swap, a fork from Uniswap what has reached a billion dollars locked in total in less than 24 hours.
The news may sound good to ether miners, whose income grows with higher fees and more transactions. Actually, The hash rate of the Ethereum network has grown steadily and recently hit its 20-month high, despite the recent controversy surrounding a proposal that aims to reduce block rewards by 75%.
However, points to a short- and long-term problem with the sustainability of Ethereum. While DeFi seems to be starting another uptrend for Ether, it also appears to be the main cause of its glitches.
As the DeFi sector continues to push its activities beyond the boundaries of the network, An overload of the same leads to a larger number of unconfirmed transactions, longer waiting times, and higher fees as users compete to confirm their transactions faster. This problem also makes some smart contracts virtually unusable, an extremely important topic for the future of Ethereum as a smart contract platform.
While USDT was consistently the one that spends the most gas on the grid, the decentralized stock exchange and liquidity protocol, Uniswap, It recently surpassed Tether as the smart contract that makes the most of the resource.
Uniswap has also made waves in the media, when it outperformed Coinbase in daily trading volumeThis shows how big DeFi is getting in the digital asset space.
Transaction costs remain a major problem in the crypto space
Ethereum had constant problems with high fees and congestion. Recently, The network increased the maximum gas limit per block from 10,000,000 to 12,500,000 gas, but it’s not the only network whose rates have increased.
Bitcoin has also seen a significant surge in the price of transaction fees, from less than a dollar in July to $ 3.53 at the time of this writing. The network hit a high of $ 6.47 per average transaction on August 6th.
However, these fees don’t matter on large transactions, such as a user who paid less than $ 5 to transfer over a billion bitcoin. However, When it comes to small payments, the current fees (in both Ethereum and Bitcoin) are simply unbearable. The nature of the transaction fees has become one of the main arguments for Classify Bitcoin as a type of “digital gold” rather than a currency.
While transaction fees have been a constant problem for Ethereum, there are a few workarounds, including an old suggestion for improvement Ethereum (EIP), EIP 1559, This is now being tested on Filecoin, a decentralized file sharing and payment protocol. The proposal has successfully improved the platform’s fee structure and could theoretically also apply to Ethereum.
ETH 2.0 and second layer options
While some solutions like EPI 1559 and even the upcoming Ethereum 2.0 update are still being developed and tested, There are currently second level solutions that can help with the Ethereum fee issuance.
Several Layer 2 solutions offer an alternative for simple network payments, many of which are already active. Most notably OMG Network, which recently migrated Tether to allow cheaper USDT transfers.
Stephen McNamaraOMG Network’s Chief Operating Officer explained how the network can solve the current issue of ether fees. He said to Cointelegraph:
“OMG Network supports a fast, inexpensive and secure transfer of values from ETH and all ERC-20 tokens. By moving token transfers into the OMG network, other more experimental and expensive smart contract services can still run on Layer 1. The integration into our network enables transaction fees of just a few cents and a validation time of a few seconds while maintaining security at the Ethereum level. “
Vitalik ButerinThe co-founder of Ethereum also urged the community to take advantage of these solutions. He did it through a Tweet::
“For those who answer” gas rates are too high “, my answer is” good, so more people should accept payments directly through zksync / loopring / OMG. “Seriously, the escalation to more than 2500 TPS for Simple Payment Apps is here, we just have to … use them.”