High transaction fees, good news for Ethereum (ETH)? This is in any case what Joe Lubin, co-founder of the blockchain of the same name, thinks. According to him, the astronomical gas fees are a necessary pain for growth and a sign of the network’s success. A position that will not calm users who complain about it constantly.
High transaction fees good news for Ethereum (ETH)
The debate over gas fees on the Ethereum blockchain seems endless. Some believe that they are far too high, especially for small transactions. For example, when using a Uniswap (UNI)-style decentralised finance protocol (DeFi), it is not uncommon for fees to be higher than the amount invested or withdrawn.
Yet this debate does not seem to worry Joe Lubin. Indeed, according to the co-founder of Ethereum, high transaction fees are a necessary pain for the growth of the network and a sign of its success. In other words, high gas fees are good news for Ethereum.
According to Lubin, high transaction fees are a sign of the success of the Ethereum blockchain. He believes that these fees cannot be avoided because when a new technology becomes successful, scalability issues follow.
However, Joe Lubin’s optimism is not to the taste of some. One thinks in particular of Su Zhu, co-founder of Three Arrows Capital, who simply decided to abandon Ethereum, accusing the network of having abandoned its users.
Yes I have abandoned Ethereum despite supporting it in the past.
Yes Ethereum has abandoned its users despite supporting them in the past.
The idea of sitting around jerking off watching the burn and concocting purity tests, while zero newcomers can afford the chain, is gross.
– Zhu Su (@zhusu) November 21, 2021
The explanation for the high transaction fees of the Ethereum blockchain (ETH)
Some anecdotes have been in the news this year. Although they are primarily mistakes, they include the user who paid $430,000 in fees for a failed transaction or the exchange platform BitFinex, which spent no less than $23.7 million in fees for a transfer of $100,000 USDT.
Getting back to reality, how can we explain these fees, which can be, objectively, very high at times? The answer lies in network congestion and lack of scalability. Indeed, Vitalik Buterin’s blockchain is used in the majority of DeFi protocols, as well as in the creation of non-fungible tokens (NFT).
Thus, the Ethereum network is used far beyond the mere exchange of ETH, which represents a tiny part of the transaction fees. Finally, putting aside the king of Bitcoin (BTC), ETH is the second largest cryptocurrency market capitalization.
While Ethereum’s market dominance is good news for the network, this success should not hide the need for modernisation. That’s why Ethereum 2.0 is expected to be the messiah.
Ethereum 2.0, the solution to lower transaction costs
The Ethereum 2.0 blockchain is expected to be operational in the second or third quarter of 2022, according to Joe Lubin. He adds that this version, which provides for a shift from proof-of-work (PoW) to proof-of-stake (PoS) consensus, should help lower transaction fees.
Behind Ethereum, the competition is getting organised. For example, Solana (SOL), which promises 60,000 transactions per second, has entered the top five largest capitalisations. Similarly, Avalanche (AVAX) has entered the top 10.
To date, Ethereum’s popularity has continued to grow and does not seem to have suffered from its high transaction fees and competitors. But how long could this dominance continue, especially if version 2.0 falls behind?
