Ethereum transaction fees are diving after the latest leg higher in decentralized finance (DeFi) has slowed down to an abrupt halt. Paying to transact on the network still costs an order of magnitude more than it did at the start of 2020, though. This goes to show that solutions are still needed in the long run.
Ethereum Transaction Fees Crash After Record Day
Yesterday, Ethereum transaction fees shot through the roof due to a record influx in demand for transactions.
As this writer tweeted, the “gas price” of Ethereum transactions passed 277 Gwei, then over 350 Gwei later that evening. For context, this means that it cost around $2.50 to send ETH, $5 to send an ERC-20 token, $10 to trade coins on Uniswap, and much more if you wanted to do complex DeFi transactions.
Wow… seems that🍠is having quite the effect on Ethereum transaction fees.
“Fast” recommended gas price: 277 Gwei.
That’s $2.25 to send ETH, ~$5 to send ERC-20s, $10 to trade on Uniswap, and more if you intend on doing more complex transactions. pic.twitter.com/kk6dhUItD9
— Nick Chong (@n1ckchong) August 12, 2020
Blockchain analytics firms simultaneously reported that Ethereum fees were so high, 70% of miner rewards were from transactions alone. Normally, this is closer to 10-20%, especially during bear markets.
A day later, though, and Ethereum is finally recovering from the congestion in transactions.
According to ETH Gas Station, the gas price is now closer to 100 — a level still historically high but over 60% lower than the highs seen yesterday.
The correction in the cost of Ethereum transaction fees is seemingly due to the collapse of DeFi’s Yam Finance.
Yam Finance was an experimental DeFi protocol that achieved over $750 million in deposits in under two days and drew in thousands of users, who each made a handful of transactions. The experiment collapsed when gas prices peaked, suggesting there is a correlation between the success of Yam and the cost of Ethereum transaction fees.
Related Reading: Crypto Tidbits: Bitcoin Explodes Past $11k, Ethereum 2.0 Nears, Cardano’s Shelley Launches
What Solutions Are There?
Although Ethereum transaction fees are down massively from recent highs, users are still looking for solutions. After all, spending in excess of $5 per decentralized exchange trade is still a cost that isn’t sustainable for most investors.
Eric Conner of ETHHub and Gnosis shared the message below on August 12th in which he outlined scaling solutions. According to Conner, there are five solutions currently in the works that are showing promise:
- Ethereum 2.0, the all-encompassing blockchain upgrade that will implement sharding and Proof of Stake (staking)
- Optimistic rollups
- Payment channels
We get it, gas fees are high. That’s why people are working on:
I know I missed a lot of teams, sry!
— eric.eth (@econoar) August 13, 2020
Featured Image from Shutterstock Price tags: ethusd, ethbtc Charts from TradingView.com Ethereum Transaction Fees Drop By 60% After Collapse of Yam Finance