The past few weeks have seen Ether stall in terms of price action, with the cryptocurrency trading between $210-240. Not the same can be said about Ethereum’s underlying blockchain activity.
Due to a perfect storm of events, the number of users of the network has skyrocketed.
Blockchain analytics firm Santiment reported last week that the number of new ETH addresses created a day surpassed 100,000:
“Ethereum’s network growth metric has rapidly been on the rise since the beginning of 2020, creating 237% more addresses yesterday than it did on Jan 1, 2020 (and ~+200% accounting for rolling averages now vs. then).”
A similar trend of growth has been seen in the daily count of transactions.
Below is a chart from Etherscan showing that the number of transactions on Ethereum is starting to near 2018’s all-time high. Late last week, there were over 1.1 million transactions in a single day; the all-time high is around 1.37 million transactions in a day.
Graph from Etherscan of the number of daily transactions
This spike in usage hasn’t come without a cost, unfortunately.
Ethereum Fees Recently Hit Multi-Year Highs
According to data shared by Tradeblock, the cost of transacting on Ethereum has hit highs not seen in over two years:
“With the rise in DeFi apps, majority of which are built on Ethereum, ether gas fees hit recent highs, meaning transaction costs across the network have risen in order for timely transactions to occur.”
Tradeblock’s data indicates that the cost of “gas” reached 120 Gwei, almost double the 70 Gwei highs of 2017/2018’s bull market. Cross-referencing TradeBlock’s data to that of Etherscan, it can be said that at 120 Gwei, fees were the highest since February 2016.
Anecdotal evidence has corroborated this trend.
As reported by NewsBTC, the Head of Business Development at Kraken’s futures division, Kevin Beardsley, wrote last week:
“I have spent $14 on ETH gas fees to transfer/lock my $15 into @CurveFinance and I’m earning a princely $0.079 in weekly $SNX rewards. I’ll break even in just 177 short weeks! (not including gas to close contracts.”
Beardsley is but one of many saying that it cost them in excess of $10 to send a single transaction.
Solutions Coming to the Fore
It should come as no surprise that there are moves being made to mitigate Ethereum’s high transaction fees
There are currently attempts to raise Ethereum’s gas limit, thus allowing for more transactions. This, in turn, should decrease the fees one pays to transact on the network.
Another solution is Ethereum Improvement Proposal 1559, proposed by blockchain founder Vitalik Buterin and others. The proposal suggests that the current fee model is “inefficient and needlessly costly to users.”
The solution: “a mechanism that adjusts a base network fee based on network demand, creating better fee price efficiency and reducing the complexity of client software needed to avoid paying unnecessarily high fees.”
In the long run, there’s also Ethereum 2.0 — a sweeping upgrade intended to change how the blockchain works from a fundamental level. That upgrade is expected to dramatically increase the number of transactions possible.
Featured Image from Shutterstock Price tags: ethusd, ethbtc Ethereum Fees Just Hit a Multi-Year High — and Users Aren't Happy