Ethereum’s gas fees are once again rising to record highs, rendering many decentralized financing protocols useless for casual investors.
After an increase of about 20% in the last 24 hours, the average transaction costs for Ethereum are now at a record $ 17.67.
Many DeFi projects that require the execution of complex smart contracts have reporting costs associated with using protocols that require complicated transactions that are now in excess of $ 1,000. Amid the chaos, Twitter user “Olive Allen” reported estimated gas fees of nearly $ 5,000 to accept a bid for Rarible.
– Olive Allen (@IamOliveAllen) February 3, 2021
When Cointelegraph checked earlier in the day, a single transaction on Synthetix was valued at $ 1,162, but the protocol is undergoing an upgrade that could affect the estimates.
But even simple swaps with decentralized exchanges Uniswap and SushiSwap cost between $ 40 and $ 75.
I’ve tried a $ 75 swap on sushi before. The gas cost was $ 74 for sushi swap and $ 37 for uniswap. Not a logical feeling to even trade anything with such fees.
– Kole Pfeiffer (@ 6pointd) February 4, 2021
In response to the high fees, ConsensusRough podcast co-host ‘Checkmate’ warned DeFi users to consider the costs associated with running smart contracts before investing.
He shared the screenshot of a user claiming to show that the estimated gas cost is higher than the price of Ether. (Although this could have been falsified, it is broadly consistent with similar reports).
Think carefully about whether you can unwind your defi positions when it comes time to sell and gas fees are exponential.
It’s worth considering this risk as the inability to get out is increasingly becoming a reality. https://t.co/m9d09pUe0a
– _Checkmate ⚡checkonchain.com (@_Checkmatey_) February 3, 2021
Ethereum isn’t the only one to suffer from congestion, with Bitcoin’s average cost currently exceeding $ 14 to.
Despite the skyrocketing costs associated with using the Bitcoin and Ethereum networks, traders seem fiercely optimistic with Ether releasing a new all-time $ 1,700 at around 2pm UTC.
Since breaking new price highs on Feb. 2, Ether has gained about 14%. Bitcoin is also recovering, testing $ 38,000 after gaining 6% in the past 24 hours.
Ether’s record cost underscores the utility of second layer of scale solutions prior to Eth2’s review of Ethereum. Synthentix is currently in a phased migration to optimistic roll-ups to bring gas prices down, as other platforms explore rival layer two solutions such as xDai, or scalable Layer-One networks like Polkadot.
Ankr Network CEO and Co-Founder Chandler Song recently described the crypto bull run as “expos[ing] many vulnerabilities of the Ethereum network, on which most DeFi projects are built. ”
However, DeFi users may not have to wait until Eth2 to see a reduction in gas costs on the Ethereum mainnet, with developer Tim Beiko noting significant progress on the EIP-1559 test net last month.
EIP-1559 was proposed in 2019 by Vitalik Buterin and Eric Conner, recommending the introduction of a combustion mechanism to reduce fee volatility. But with the proposal reducing the income of miners petty tips sent in addition to a burnt base fee, EIP-1559 met significant resistance from the Ethereum mining community.
Grayscale recently speculated that EIP-1559 was a “positive feedback loop ” for the price of Ethereum, the cost must exceed the rate at which the new supply is created.