Ethereum’s transaction fees are constantly increasing and exceed the level of fees in the Bitcoin network by 60%. What does this mean for ETH traders?
For the first time in months, Ethereum miners have raised the level of transaction fees higher than Bitcoin miners. Analytical firm Glassnode released data showing that Ethereum’s daily network charges were $498,000 and Bitcoin’s $308,000. To date, there were only 141 days (8%) when this situation occurred.
Ethereum’s transaction fees have risen sharply over the last three months. Fees increased on average by 90% compared to just three months ago.
Reasons for increasing transaction fees
There are several reasons for increasing Ethereum transaction fees. The first is the increased demand for sending Ethereum between exchanges due to cryptocurrencies fluctuations. Another reason is the growing popularity of the Ethereum-based Ponzi schemes. Thirdly, stablecoins are increasingly being adopted in the financial world.
Analysts and cryptographic specialists claim that the trend of rising transaction fees has many positive and negative effects on the Ethereum network.
Upward trend Ethereum
The increasing use of the Ethereum network is a positive catalyst for the ETH price. According to many analysts including the founder of Mythos Capital, the ETH price was closely correlated with the transaction fees paid by Ethereum users over the past 4 years. If the increases continue, Ethereum is able to increase its price by tens of percent.
The solution to the scaling problem
High transaction fees also have their disadvantages for Ethereum users. If someone wants to interact with some decentralized financial contracts like MakerDAO or Uniswap, transactions can be as high as $1. For some operations, these fees can be as high as a few dollars, especially if you care about the speed of transactions.
This means that if you are an Ethereum user, trading or spending a small number of your resources on DeFi contracts, you will spend a relatively large part of your crypto on the fees themselves. Hence the emphasis on scaling solutions.
A user who tries to trade or spend small amounts of ETHs on DeFi contracts spends a relatively large part of his resources on the fees themselves. This is why there is such a strong emphasis on scaling solutions.
— 1inch.exchange (@1inchExchange) June 4, 2020
Representatives of the crypto exchange 1inch.exchange suggested that ETH miners should increase the block limit to hold more trades every 14 seconds. There is currently a gas limit of 10 million, although it can be increased by up to several dozen percent to accept more trades.