Ethereum gas fees hits all-time high as DeFi boom continues
Last Updated on 2 September 2020 by CryptoTips.eu
Leading altcoin blockchain network Ethereum has seen a surge in recent days in transaction fees which have reached new historic highs. This latest trend is as a direct consequences of the success of Decentralized Finance (DeFi).
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DeFi growth has undermined Ethereum network
The expansion of the DeFi ecosystem appears to be limitless with new projects being launched everyday. At the heart of this sector is Uniswap a Decentralized exchange that has grow at a rapid speed.
Uniswap growth has been exponential with its daily volume temporarily surpassing that of centralized exchange Coinbase last week which is quite a feat for a DEX. This race by traders to Uniswap is the major cause for this Ethereum congestion.
According to data from Etherscan.io, Uniswap alone consumed more than 27% of the gas in the last 24 hours. The exchange is followed by Tether’s stablecoin which is mostly hosted on the Ethereum blockchain. USDT consumed between 10 and 15% of the gas daily for its transactions.
According to data from Blockchair.com, Ethereum’s transaction fees hit an all time high of $16 in September while the median transaction cost is $10. On average at the time of writing, a transaction on Ethereum costs between $4.65 to $6 with the cost depending on the speed of transaction confirmation.
The entire Ethereum ecosystem affected
The increase in fees for Ethereum has got many concerned within the crypto community. This is because as the network activity reaches its limits, its congestion leads to a higher number of unconfirmed transactions and confirmation times take longer than normal.
It also renders some smart contracts virtually unusable. This is a critical issue for Ethereum, which has no shortage of competition. Some of the top exchange platforms have also spoken about taking drastic measures to counter the rising cost.
On Twitter, Binance CEO Changpeng Zhao pointed out how significant this was with the exchange losing money when a user withdraws from ETH.
The high ETH network gas fees is causing problems for most exchanges, running with $10-20 loss on each withdrawal.
— CZ Binance (@cz_binance) September 1, 2020
Will have to adjust our withdrawal fees sooner or later. ?
If the increase in fees continues at this rate, Ethereum users will suffer in the long run. The deployment of Ethereum 2.0, which is expected to solve such a problem, is long overdue by the crypto community.
Additionally, the DeFi ecosystem will undoubtedly continue to grow in the coming months, causing Ethereum’s fees to continually rise if a solution is not quickly found.
