Inevitably, this does create big problems for the many decentralized finance protocols that are reliant on the Ethereum network.
Ether transaction fees have gone through the roof — hitting an average of $23.37 on Feb. 4.
To put all of that into context, they stood at just $3.56 on Jan. 1. So what’s going on… and what effect is this having on the Ethereum blockchain?
Well, it’s clear that some exchanges are beginning to buckle under the strain of these gas fees.
Liquid, a trading platform based in Japan, took the drastic move of halting ETH withdrawals altogether — however, the company reassured its customers that service will return to normal once transaction costs start returning to normal.
The announcement didn’t go down well with some Liquid users, with many asking why the company doesn’t just give its clients the option to pay higher fees if they need their tokens urgently.
All of this comes as ETH basks in the glow of new all-time highs at $1,680 — and the flurry of trading activity has also been good news for miners, who have been raking in tens of millions of dollars in transaction fees.
But, inevitably, this does create big problems for the many decentralized finance protocols that are reliant on the Ethereum network — and in some cases, these fees render certain services too expensive to use. All of this has led some projects to pursue so-called “Ethereum” killers such as Polkadot, which can handle a greater number of transactions per second at a lower cost.
With gas fees continuing to nudge into unprecedented territory, the upgrade to the Ethereum 2.0 network has never been more urgent — alas, it may be some time before the transition to Proof-of-Stake is complete, with sharding meaning that transactions can be executed in parallel.