Rising Ethereum gas fees impact NFT and token transactions, reaching unprecedented highs. Learn about the challenges and upcoming solutions.
The crypto market's recent surge has brought about not only exciting opportunities but also a considerable spike in Ethereum gas fees.
Ethereum's network congestion led to gas fees surpassing 174 gwei by midday Monday, causing a substantial financial burden for traders engaging in various transactions within the blockchain’s ecosystem.
Highlighting the gravity of the gas fee surge, the average cost for a typical NFT transaction on Ethereum exceeded $372.29 at certain intervals on Monday. This implies that even casual transactions, such as exchanging profile pictures (PFPs) with friends, could incur costs in the hundreds of dollars for users.
Token swaps on Ethereum reached almost $220 per transaction at multiple points on Monday, making certain crypto transactions financially impractical, potentially nullifying any gains from token flips.
Borrowing on Ethereum incurred costs above $186 per transaction on specific occasions, and transferring funds from Ethereum to another blockchain to evade high fees averaged over $70.
Over the past 24 hours, Uniswap, a protocol facilitating the trading of ERC-20 tokens, emerged as the leading consumer of gas in the Ethereum ecosystem, with over $4.2 million worth of ETH burned in transactions on the platform.
This surge in on-chain fees coincides with the remarkable value upticks of cryptocurrencies like Ethereum and Bitcoin, as well as on-chain assets like NFTs.
On Monday morning, ETH soared to $3,500 for the first time since the beginning of 2022. Shortly thereafter, an Ethereum-based CryptoPunks NFT fetched an astounding $16.03 million in ETH, marking the second-highest price ever achieved by a piece in the popular PFP collection.
The escalation in gas fees also precedes Ethereum's eagerly awaited Dencun upgrade, promising a substantial reduction in transaction costs on layer-2 scaling networks through an innovative data storage method known as proto-danksharding.
Several layer-2 developers have expressed optimism to Decrypt, anticipating that Dencun will render gas fees in the Ethereum ecosystem practically obsolete. Polygon Labs VP of Product David Silverman shared his perspective, stating, “We’re heading towards a world where most users won’t experience gas at all, and it becomes abstracted away.”