Transaction fees on Ethereum are reaching record highs. They are expected to break the record of $722 million in May.
The cost of transactions on Ethereum is a recurring concern. Their high level impacts the activity, especially on DeFi. This is actually the main argument of Ethereum’s competitors, such as Cardano, to encourage migrations.
In May, these fees are well on their way to reaching a new record. According to figures from Coin Metrics, they are expected to far surpass the previous ATH, yet $722 million. If the trend continues, which is no longer a given…
Thus, transaction fees could by the end of May exceed the network’s total revenue for the entire first quarter. That figure would flirt with $1.7 billion in ETH by the end of the month.
There is no shortage of reasons at present to drive up the bill. These fees apply to all transactions made on Ethereum. It can be a transfer of funds as well as an auction on an NFT.
And the more the public blockchain is solicited for transactions, the more the congestion increases. With this saturation, the costs of transactions on Ethereum are skyrocketing. The development of the NFT and DeFi markets is already a factor in congestion.
The historical value of ETH is also attracting a growing number of investors. In the past few weeks, Ether was successively crossing the $3,000 and then $4,000 mark. However, the crypto-asset has since fallen sharply to around $3,400 on May 18.
But Ethereum is not designed to accommodate such a colossal volume of transactions. This is the reason for the exploding fees, but also the reason for the migration to ETH 2.0 and the Proof Of Stake.
However, this switchover will take time. To remedy the congestion, Ethereum developers are therefore planning network updates. In July, “London” will thus come to automate the gas prices in order to contain them.
The miners, who are the first beneficiaries of this, are not very happy. However, there are other events that may contribute to the lowering of fees. The solution is not an enviable one for investors, however.
Indeed, due to the sharp decline in the price of cryptocurrencies, fees are currently falling. According to Bitinfocharts, the average cost thus fell from almost $70 to $20 in a few days. At the same time, the ETH lost 27% of its value.