With Ethereum’s fees skyrocketing to new highs as ETH entered price discovery mode, using some complex DeFi protocols was made impossible as the gas fees increased to over $1,000
Ethereum’s gas fees are spiking to record highs once again, rendering many DeFi protocols practically unusable for traders. After increasing somewhere in the ballpark of 20% in the last 24 hours, average ETH transaction fees are now at a record $17.67.
Transaction fees as high as $5,000
As many DeFi projects require the execution of complex smart contracts, some reports show that fees associated with using these protocols now exceed $1,000. As the chaos unveiled, Twitter user “Olive Allen” reported their estimated gas fees of nearly $5,000 to accept a Rarible bid.
— Olive Allen (@IamOliveAllen) February 3, 2021
However, this is not the only case of such high transaction fees. A single large transaction on the Synthetix Network was estimated at above $1,100, while even simple swaps using Uniswap and SushiSwap cost anywhere from $40 to $75.
— Ran Neuner (@cryptomanran) February 3, 2021
Projects exploring other options, but is it worth it?
Ethereum is not alone when it comes to soaring transaction fees, with Bitcoin’s average transaction costing over $14 at the moment. Despite the skyrocketing costs of utilising the BTC and ETH networks, traders appear extremely bullish on both cryptocurrencies. Ether has recently posted a new all-time high of $1,700.
Ether’s popularity is highlighting the skyrocketing fees and pointing to the utility of second-layer scaling solutions prior to Ethereum 2.0. While Synthentix is currently trying to reduce gas prices by performing a staged migration to Optimistic roll ups, other platforms are testing rival layer-two solutions such as xDai, or layer-one networks with better scaling such as Polkadot.
However, DeFi projects and users may not have to wait until Ethereum 2.0 to see a reduction in gas fees, with developer Tim Beiko recording significant progress on the EIP-1559 testnet in February. EIP-1559 is a mechanism that introduces a burn mechanism to the ETH network, all with the purpose to reduce fee volatility.