Though Ether’s (ETH) value has continued to showcase increasing signs of stability around the $1,800 range over the past fortnight or so, users of the premier altcoin’s network have been faced with rising gas fees as well as increasing network congestion issues. To put things into perspective, since summer last year, a time when the DeFi boom was starting to peak, Ethereum’s network fees have more than doubled.
While this fee increase quite directly relates to ETH’s increasing value, there is no denying that it also clearly shows growing demand for ERC-20 tokens, stablecoins, as well as various decentralized finance-based offerings in general.
As is evident from the chart below, costs of facilitating transactions on the Ethereum network have increased significantly over the last few months, with the average transaction fee touching an all-time high of $39.49 on Feb. 23.
Not only that, on March 20, the average transaction fee is at $16, a price point that is quite high, especially for developers and those looking to facilitate small value transactions.
Also, as nonfungible tokens continue to gain mainstream traction, it stands to reason that transaction costs on the Ethereum network will continue to rise in the near future. Thus, until a viable scaling solution is implemented in the near term, network congestion and high transaction costs are likely to continue, especially as the NFT sector continues to thrive.
Is the network broken beyond repair?
Providing his thoughts on Etherum’s existing state of affairs, Jay Hao, CEO of cryptocurrency exchange OKEx, told Cointelegraph that Ethereum is definitely at a point of inflection along with other layer-one solutions, adding: “They are being forced to address their issues of rising fees and network congestion fast — or risk losing out to competitors who can offer lower fees and higher throughput.” He also added:
“Ethereum still has by far the largest developer community, as well as the number of DApps, built on it, but still, complacency is a killer.”
And while Hao does believe that Ethereum will eventually be able to cope with its issues at some point in the future, the crypto community no longer wants to wait until the transition to proof-of-stake and Eth2 has been complete, especially since an increasing number of developers and other network users are starting to expand their operations and switch to alternative ecosystems.
For example, many platforms have undertaken the integration of different versions of Tether (USDT) and USD Coin (USDC) — a la Algorand, Tron — allowing stablecoin traders to transact quickly and at a fraction of the cost currently being levied by the Ethereum network.
Moreover, an increasing number of EVM-compatible blockchains — OKExChain, Binance Smart Chain, etc. — have sprung up and are challenging Ethereum’s dominance. “Competition is healthy, and it forces the incumbents to do better and focus on providing users with the experience they deserve,” Hao opined.
However, Jack O’Holleran, CEO of Skale Labs — a decentralized Ethereum compatible layer-two PoS network — believes that the network’s rising gas fee issues will be alleviated as scaling efforts continue to be worked on, adding:
“The Ethereum mainnet will evolve into a base layer of security and settlement. Scalability layers will sit on top of Ethereum, providing functionality for smart contract execution and low gas fees. We will also see the rise of application-specific blockchains, which provide more price efficiencies with greater predictability.“
What is the Berlin upgrade?
After months of planning, the Ethereum community recently laid out its implementation timeline for “Berlin,” with the upgrade slated to go live on the Ethereum mainnet at block 12,244,000, or on April 14. In this regard, it bears mentioning that a total of four Ethereum Improvement Protocols will be deployed as part of Berlin.
These include EIP-2565, which seeks to reduce…