The ETH Gas fees increase by 7000% since the year started as the network reached an all-time high in terms of transaction capacity as well as the demand growth in the decentralized finance sector so let’s read further in our Ethereum news today.
The cost of sending one transaction on Ethereum exploded in the past few months and the ETH gas fees increase mark 7000% according to GasNow, which calculates the fees and shows an increase to about 700 Gwei. This is 7000 percent higher than the figure was at the start of the year when Ethereum was congested with the slow Defi adoption.
A quick thread on supply and demand economics, and why certain “naive” solutions to high gas prices won’t work. pic.twitter.com/lmmyx0x8vL
— vitalik.eth (@VitalikButerin) September 2, 2020
At this point, it is unfeasible for retail investors that have thousands of dollars to make regular transactions on the Ethereum network. It costs $7 to send ETH from wallet to wallet, $15 to send ERC20 tokens, $60 to trade on Uniswap, $120 to deposit stabelcoins into YFI vaults. Vitalik Buterin, the founder of Ethereum, addressed the high transaction fees and he noted that raising the ETH block size is not a short-term solution because there are many risks in block propagation of the node efficiency:
“However, increasing capacity is hard to do safely. Ethereum nodes are already running near their limits and there is always the risk of DoS attacks that are much slower to process than regular blocks, slowing the chain to a crawl. Higher gaslimits would exacerbate this.”
The short-term solution that he believes is fine for now is the Ethereum improvement Proposal 2929 which will increase the gas costs of some sensitive operations and will make it safer to increase the gas limits but this is also a short-term solution that he sees reducing the transaction costs by about 25%. The medium-term solution is looking at the rollups technology:
“In a rollup-heavy ecosystem, on-chain gas fees would remain the same, and 465 gwei may even become the norm, but most transactions would be happening inside rollups, where actual fees paid by users would be hundreds of times lower.”
The introduction of sharding with ETH2 will increase the capacity of the base layer by 100X which will reduce the fees by about a dozen percent:
“The only solution to high tx fees is scaling. Tether, Gitcoin and other apps are doing the right thing by migrating to ZK rollups today. I’m excited about the soon-upcoming optimistic rollups that will generalize rollup scaling to full EVM contracts.”