The Ethereum blockchain has become overloaded after several days of low activity. According to GasNow, an ETH transaction fee tracker, the average gas price paid by users of the network has risen to over 500 Gwei.
This means it costs over $ 50 to trade on Uniswap and it costs a lot more if you want to complete more complex DeFi trades.
Here’s what’s going on with Ethereum’s transaction costs and what it could mean for the rest of the crypto market.
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Why are Ethereum transaction costs skyrocketing?
Ethereum transaction costs are increasing as a result of the launch of Uniswap’s own currency, UNI.
The launch of the coin was based on community ownership of the coin. That meant tens of thousands of users had to make a handful of transactions – more than three or more – just to claim, sell, or trade their coins from address to address.
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Can harm the DeFi Bull Market
Messari’s Ryan Watkins fears that this high compensation situation could be dangerous to long-term growth in the space:
Ethereum is damn near useless right now. I can only imagine what the retail industry will think when they eventually hit this market and are faced with $ 50 + gas charges and 10+ minutes of transaction confirmations. This has been my main concern about this bull market. The protocols are ready, the infrastructure is not.
Ethereum is damn near useless right now.
I can only imagine what the retail industry will think when they eventually hit this market and face $ 50 + gas charges and 10 + minutes of transaction confirmations.
– Ryan Watkins (@RyanWatkins_) September 17, 2020
This was echoed by many others in the space. Others note that the high transaction fees for Ethereum are likely to be a ‘hard cap’ for the ongoing bull market, as at some point a majority of retail users will be priced making this a whale market.
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Featured Image from Shutterstock Price tags: ethusd, ethbtc Charts from TradingView.com Ethereum Transaction Fees Surge to All-Time Highs—And That's Not Good