Ethereum average Gas Price soars above 300 gwei! Miners rejoice, users in distress.

Since the beginning of the year, due to the escalating DeFi craze, Ethereum gas fees have been continuously rising. The current average Gas Price on Ethereum is 30 times higher than it was at the beginning of the year, with just one transaction costing the equivalent of 220 TWD in gas fees.

Ethereum Gas Fee Skyrocketing

According to data from Etherscan, at the time of writing this article, the average Gas Price on Ethereum has surged to 330 gwei, with some transactions requiring over 400 gwei to be successfully confirmed. In other words, users now have to pay approximately 0.0195 ETH ($7.6) in gas fees even for executing the simplest ETH or ERC20 token transfers.

Amid the explosive growth in on-chain transaction demand, Ethereum miners are the happiest. According to data from Token Terminal, miner revenue has increased by approximately 1455% this quarter.

Uniswap Dominates Usage

The surge in Ethereum gas fees is closely related to the popularity of liquidity mining. The high yield of liquidity mining has attracted a large number of investors and funds in the market, leading to a surge in on-chain transaction demand, contract interaction demand, decentralized lending demand, and token transfer demand flooding in from all directions. With mining rewards sufficient to cover the cost of gas fees, most investors are willing to interact with on-chain contracts regardless of the cost.

Moreover, according to data, in the past 24 hours, the highest gas consumption on the Ethereum chain is attributed to the automated market maker protocol Uniswap (approximately 16.8%), which is 5% higher than the gas consumption generated by USDT transfers, the second highest. Uniswap has such a high consumption rate mainly because the tokens generated by liquidity mining are mostly traded on Uniswap (as these tokens cannot be immediately listed on centralized exchanges and setting up a liquidity pool on Uniswap is relatively easy). While paying a $20 gas fee for one Uniswap transaction might be insignificant for high-net-worth individuals, for retail investors, this cost has become a significant barrier to participating in liquidity mining.

Solutions

If the high transaction fees on Ethereum persist, the development of DeFi will eventually stagnate or even decline. Although the implementation of ETH 2.0 can introduce sharding to enhance the scalability of the underlying Ethereum blockchain (Layer 1), it is expected to take several more years to launch. In comparison, the development and implementation of Layer 2 solutions are relatively simpler, but mainstream adoption rates of Layer 2 solutions related to DeFi or DEX in the market, such as Loopring and DeversiFi, are still not high.

On the other hand, the latest DeFi project Serum, launched by FTX exchange and Alameda Research founder Sam Bankman-Fried, which surged 18 times upon its debut, aims to address the bottleneck of transaction speed and gas fees on the Ethereum chain within the DeFi ecosystem. However, whether the platform can truly attract market liquidity and users after its launch remains to be seen.