The co-founder of Etherium is pleased with the cryptocurrency network’s high fees. But why?
As applications such as decentralised finance and NFT tokens have grown in popularity, so has the cost of using the cryptocurrency’s network. The price of gas (GAS), which in the case of Ether is measured in gwei, the smallest indivisible particle of the coin, has been quite low lately, but this year the fee for interacting with the blockchain has set an all-time record several times. This is inconvenient for ordinary users, but very good for the Etherium ecosystem as a whole, says co-founder Joe Lubin. We tell you more about his point of view.
As a reminder, commissions on the Etherium network in 2021 have indeed become a serious problem for users. And we're not just talking about newcomers, but professional investors as well. In particular, Su Zhu, head of hedge fund Three Arrows Capital, said in late November that he was refusing to interact with ETH because of high commissions, which for some reason no one is solving the problem.
But some weeks later 3AC bought a large amount of Ether, which means that its advantages outweigh its disadvantages. Read more about the situation in a separate article.
We checked the current data: right now, transactions on the Etherium network are still expensive. Specifically, a regular ether transfer will cost $5.6, while a USDT or other ERC20 token transfer will cost $17.5. Finally, the exchange procedure on the already familiar decentralised Uniswap exchange costs $53.
Commissions on the Etherium network
However, the co-founder of the Etherium project, Joseph Lubin, also sees a positive in the situation. Here are the details.
High commissions on the Etherium network
The periods of skyrocketing commissions over the past week are clearly visible in the chart below. As a reminder, each transaction on the Etherium network has a cost measured in gas. The latter is burned, which means it is spent. The gas is valued in gwei, and the total amount of commission in gwei can already be converted to the amount of commission in dollar equivalent.
Commissions on the Etherium network in gwei
For comparison, here is the same commission value trend but in dollars over the past three months.
Commissions in the Etherium network in dollars
As you can see, not so long ago the average commission value was measured in tens of dollars. This is a lot compared to the nearest competitor of Ethereum called Solana, where the network interaction fee is a fraction of a cent. In part, this factor has contributed to the rise in popularity of projects like Ethereum.
For example, projects like Avalanche and Fantom have also come into the spotlight. Interaction with them is also much cheaper than with Ethereum.
However, in an interview with Decrypt, Ethereum co-founder Joe Lubin said that high fees aren’t always a bad thing. Here’s his rejoinder, in which the developer shares his perspective on what’s happening.
High fees are a measure of a project’s success. They are growth disadvantages and cannot be avoided. When a new technology becomes successful, it always has scaling problems. So whether it’s CPU cycles, monitor diagonal, or memory, software engineers make the most of the technology. And that’s what we’re seeing: consumers are making the most of blockchain technology right now.
Etherium co-founder Joe Lubin
In other words, Etherium has abruptly become so popular that the technology at its core is not enough to serve all users of the network with low fees. Amid the hype surrounding the crypto, this supposedly couldn’t be avoided. Meanwhile, the developers of Etherium have been preparing a solution to the problem for several years – a switch to the Proof-of-Stake algorithm in the second version of the cryptocurrency’s protocol, which also involves the introduction of so-called sharding. According to Lubin, the final stage of this process will take place in the second or third quarter of next year.
He also made sure to point out that things aren’t going so smoothly in the case of direct competitors to Ethereum either.
By the way, Solana and Avalanche are cool systems. But still, as they get more and more used, we see their transaction fees sometimes go up to $1 or $2. Ethereum, on the other hand, will become a blockchain blockchain. The main project to coordinate all the other solutions.
Unfortunately, for now, Ethereum users have only to wait: the only hope here is to move to Proof-of-Stake. Lubin has made it clear that in its current form, the Etherium protocol will remain “too expensive” for many users.
Etherium
We think there is logic in Joseph's words, as the high fees in the Etherium blockchain are not deterring users. Certainly, they would prefer to pay less to conduct transactions, but they end up putting up with what is happening. Accordingly, the benefits of using the network outweigh the drawbacks in the form of inflated fees. Be that as it may, we hope for a solution to this problem - at least in 2022.
What do you think about it? Share your opinion in our Millionaire Crypto Chat. There, we’ll talk about other topics related to the world of decentralisation and blockchain.
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