Ethereum transaction fees are running sky-high. That's infuriating users and boosting rivals like solana and avalanche.
- As people pile onto the network for NFTs and DeFi, Ethereum transaction fees are running red hot.
- However, the high charges are infuriating users and sending many towards other blockchains such as solana.
- Developers are scrambling to fix the issue, which might threaten ethereum's top-dog status.
As NFT-mania clogs up the network, transaction costs on the Ethereum blockchain are running red hot.
It's a problem that irritates many consumers, prompting them to explore for cheaper blockchains like Solana and Avalanche.
Some even believe it poses an existential danger to the cryptocurrency network, which touts itself as the financial future.
The ethereum network runs ether, making it the world's second-largest cryptocurrency after bitcoin, with a total market value of more than $500 billion.
The network, on the other hand, remains at the center of the modern crypto ecosystem. Non-fungible tokens (types of crypto collectibles) and decentralised finance are constructed on top of it. Both NFTs and DeFi are now multibillion-dollar industries.
Ethereum is running on surge pricing
People that use ethereum pay a "base fee" to have their transactions confirmed by "miners," or other users.
However, as interest in NFTs has grown and more people try their hand at DeFi, those fees have skyrocketed.
Consider ethereum as a ride-hailing app that is struggling to find new drivers in a city that has recently had a massive inflow of people. People now have to pay a hefty surge price for each ride (or transaction) in order to get drivers to pick them up.
In November, the average transaction or "gas" charge on the ethereum network reached $63. According to researchers at crypto exchange Kraken, that was the second-highest figure ever, trailing only May's record high of $70.
Many people are enraged by the fact that they have to pay more than $100 only to deposit $50 worth of cryptocurrencies on DeFi platforms.
On the ethereum Reddit page, one member said, "Gas fees are crazy." "If the Ethereum network can't address its gas prices, the normal customer won't utilise it," another stated.
Not all crypto enthusiasts are dissatisfied. Solana, Avalanche, and Cardano are among the networks that are positioned themselves to profit.
Transaction fees at Solana are extremely low, at a fraction of a penny. In comparison to double-digit figures for ethereum, the network is far quicker, handling several thousands of transactions per second.
Solana's native token sol has increased by more than 400% in the last 180 days, according to Coingecko. Over the same time span, Avalanche has increased by more than 500%, while ethereum has increased by around 80%.
"I believe some of the ethereum headwinds have forced individuals to wonder, 'What else do I want to buy at this point?'" Kraken's chief of research, Pete Humiston, told Insider.
So why can't ethereum simply expand the network?
It's a philosophical point, according to Ben Edgington, a developer at ethereum-focused business ConsenSys.
He told Insider that extending the capacity of a decentralised crypto network will need users to deal with ever-growing data and upgrade their devices.
"If we increase transaction throughput, those with less resources will be unable to participate," Edgington added. It wouldn't be as decentralised anymore.
Other options, such as expanding a second Ethereum layer, are being considered by developers. Many activities would be able to take place apart from the core network, which would still be accessible.
It's far too early to declare high gas fees a disaster for ethereum, according to Jack O'Holleran, CEO of ethereum development company Skale Labs. In fact, he claims that they're a sign of the network's enormous success.
"From a development standpoint, there's so much momentum around ethereum," he told Insider. "Ethereum is used by the highest-quality teams, projects, and platforms. It's the mechanism that links everything together."