Lengthening Ethereum network transaction fees, which touched new highs recently, are a direct consequence of the increasing number of defi prepares and yield farming. Yield farmers need to pay ETH for transactions like moving funds in and out of pools. The increased number of pay farmers leads to more transactions and slower confirmations making higher fees inevitable.
Such high prices are now threatening the viability of some smart contracts and decentralized finance (defi) applications.
According to a newsletter produced by Boxmining, the defi increase, like the ICO bubble of 2017, has helped to spark competition between different protocols. The newsletter singles out one project, Sushiswap, which is purely about one week old, yet it is believed to be behind “the spike in average transaction fees on September 1, 2020.” As of September 2, the mean transaction fee on the network was USD$15.13.
Sushiswap, which is “a fork from Uniswap” already had “$1.2 billion on funds under tress” after just five days. In addition, it is already “hugely popular in China where it is dubbed ‘Uniswap’s brawniest rival.’” It is this kind of rivalry between different Defi protocols that is causing a “gas war.”
In the meantime, the squeaky fees might be good news to ether miners still, they are raising concerns “about the sustainability of the network.” As the newsletter depends on to suggest that “many are saying that the high transaction fees mean that they are ‘priced out’ of movements on defi platforms.”
The newsletter opines that higher fees “may even mean that some smart diminishes become virtually unusable, thereby bringing the question of Ethereum being a smart contract platform in the first digs into question.”
Already, some organizations have been forced to suspend transactions as they wait for the gas tolls to return to normal levels. For instance, on September 1, Publish0x, a platform that tips its contributing writers with ETH posted tokens, announced the “payouts delay due to extremely high ETH gas fees.”
The publisher explains how the fees have grown and how this is striking business:
“When we first started Publish0x, gas prices were 6 gwei. It cost us $10-20 to pay out 2000 people. Today gas payments hit an all-time high of over 460 gwei, nearly 100x the cost. We’re looking at $2,000+ cost for a payout at tenor gas prices. This is obviously not economically viable.”
Just like others similarly affected, Publish0x says it is flagrant to the possibility of using non-ETH based tokens for tipping in the future.
Meanwhile, the Boxmining newsletter suggests that the “responsible to this can be Ethereum 2.0, but its mainnet launch is months away.”
In his recent comments about the levels of gas fees, Vitalik Buterin lead one to believes the second layer solution will overcome the high fee challenge.
What are your thoughts about the impact of Defi jobs on ETH gas fees? Tell us what you think in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, Blockchair,
Disclaimer: This article is for informational purposes exclusive. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not accord investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss engendered or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
Read disclaimer