Since early 2020, the decentralized financial industry has received a lot of attention for its breakthrough innovation and the lucrative high-yield opportunities offered to cryptocurrency holders.
Despite these characteristics Showing this week’s record high gas allowance that the industry is still experiencing growing pains and that the lack of a suitable layer 2 solution could push smaller investors away from DeFi.
Investors who try post a transaction on Uniswap or just approving a new token on their favorite DeFi platform will have noticed the dent these promotions put on their ETH wallets.
Data from Etherscan shows that while gas prices have not reached as high as in 2020, they are noticeably higher since December last year. This increase in gas fees also coincides with the increase in the ether price.
Analysis of different time zones shows that the costs for trades that take place during the Asian trading session are similar to those during the US trading session. This shows that cost is a factor in network utilization and highlights the 24-hour nature of the cryptocurrency market.
However, there is one group that has benefited from the sharply increased network costs. fees caused by the rise of DeFi: Whale token holders.
A closer look at wallets containing at least 20 ETH in 2020 shows a higher number of Ethereum transactions than those coming from smaller wallets, which also correlated with an increase in fees.
Since gas fees are not calculated based on the size of the transaction, but rather the costs of interacting with smart contracts, large wallet holders are more likely to engage with the protocol during higher congestion times, as a larger wallet is less affected by higher transaction fees . .
Hypothetically, a $ 200 trade and a $ 20,000 trade on Uniswap could both cost around $ 50 in fees under the current circumstances, making smaller wallets less likely to participate as the cost of the trade is 25% of the total. traded value versus 0.25%.
In order for DeFi to continue its explosive growth, the gas troubles with the Ethereum network problem must be addressed before a level of mass adoption can be reached.