Transaction fees on the Ethereum (ETH) network have skyrocketed from an average of $0.50 in the middle of June to an average of $7 now. Further, it appears this rise in transaction fees is only going to get worse.
Notably, Ethereum transaction fees are now higher than they have ever been, and have exceeded the previous record high of $5.50 in July 2018.
The rapidly rising transaction fees are a sign that the Ethereum network is now at its capacity, meaning there is no extra room to put transactions into blocks, and therefore all blocks are completely filled. Due to this, people are paying higher and higher fees to be first in line to get their transaction into a block.
In fact, apparently for some transactions fees have risen to $100, making Ethereum prohibitively expensive.
The reason for this surge in transaction fees is the Decentralized Finance (DeFi) frenzy, since most major DeFi platforms are based on the Ethereum network. Basically, the tremendous amount of transactions associated with DeFi are overloading the network.
Further, Ethereum has seen a rally from $230 to $440 in just the past month, and the speculatory activity surrounding Ethereum is also causing a surge in transaction volume.
Ultimately, it is quite possible that the transaction fee surge will get so bad that it will inhibit the DeFi frenzy, as well as cause the Ethereum market to crash. Essentially, users and platforms may start to abandon Ethereum due to the prohibitive transaction fees.
This is certainly an excellent time to launch Ethereum 2.0, which promises massively increased scalability, but for now there is no time table for Ethereum 2.0, and it appears that there will be no resolution for Ethereum’s scalability problem in the near term.