$500,000 spent on gas within one hour, ETH reaches a new high for 2020 at $486
Recently, transaction costs on the Ethereum network have reached a new hourly record. According to Glassnode, an on-chain analysis company, yesterday the miners on the network earned more than $500,000 in an hour, during a sharp increase marked by the price of Ether (ETH).
Currently the asset is at $ 440, after having reached $ 486, a new high for 2020, at the end of a 10% growth. The peak of activity on the network was attributed to the launch of Sushiswap, a fork of Uniswap that reached $1 billion in total locked-in value within 24 hours.
This is good news for the Ether miners, who have seen their revenue increase due to higher commissions and more transactions. In fact, the hashrate of the network is growing steadily, reaching the highest levels in the last 20 months, despite the recent controversy over the proposal to reduce block rewards by 75%.
However, this development highlights the growing problem of Ethereum’s sustainability in the short and long term. DeFi is pushing the crypto asset in the direction of a new bull run, but it also seems to be the main cause of its technical difficulties.
While the decentralized finance sector continues to force activity beyond the network limits, congestion leads to more unconfirmed transactions, longer waiting times and higher commissions. All of this is due to competition among users seeking faster confirmation for their transactions. In addition, this problem makes some decentralized applications virtually unusable, an extremely crucial issue for the future of Ethereum as a smart contract platform.
Tether (USDT) has always been the largest gas consumer on the network, but recently the decentralized exchange and liquidity protocol Uniswap has overtaken stablecoin to become the smart contract that uses the most gas.
These days, Uniswap has also made headlines for surpassing Coinbase in daily trading volume, demonstrating the growing importance of DeFi in the digital asset sector.
Transaction costs remain a serious problem for crypto
Ethereum is having constant problems related to high commissions and congestion. Recently, the network has increased the gas limit per block from 10,000,000 gases to 12,500,000 gases, but it is not the only ecosystem that has seen an increase in usage costs.
Bitcoin has also seen a significant increase in transaction costs, from less than $1 in July to $3.53 at the time of writing. On August 6, the network peaked at $6.47 per average transaction.
However, these commissions are still rather negligible for large transactions, as demonstrated by the example of a user who paid less than $5 to transfer over $1 billion to Bitcoin. However, when it comes to small payments, current commissions (on both Ethereum and Bitcoin) are simply unsustainable. The nature of transaction costs has become one of the main arguments behind Bitcoin’s classification as a kind of „digital gold“ instead of a currency.
Transaction fees have been a constant problem for Ethereum, but there are some solutions under development, including an old Ethereum Improvement Proposal, EIP 1559, which is currently being tested on Bitcoin Profit, a decentralized payment and file sharing protocol. The proposal has been successful in improving the commission structure on the platform and, in theory, could also be applied to Ethereum.