With the average transaction fee on the Ethereum blockchain hitting nearly $40 on February 23, it’s pretty clear that there are issues to be addressed. This is a problem for DeFi investors chasing high returns on lending protocols or investors making large amounts of ETH transactions.
But what about ordinary people trying to transact in smaller amounts, transacting in ERC20 tokens like stablecoins, ERC721 tokens like NFT, or dApp developers trying to incorporate new users? With such costs, it is difficult for investors to accumulate income and expenses.
Blockchain activity makes no sense with such long processing times and other blockchain applications being expensive to use. It’s true that the average transaction fee has fallen a bit since February’s high, where it’s currently around $19, but still payment providers like PayPal offer better rates in some cases – hardly promising for crypto. In addition, the cost of gas decreases with the price of ether. As soon as it prepares to soar again, the cost of interacting with the Ethereum network will soar with it.
How does Ethereum solve this problem?
Even before the CryptoKitties collection of cat game collections clogging up the Ethereum network in 2017, the limitations of its scale were well understood. By 2014, several scaling solutions had been brought from ZK-SNARKS (now called roll ups) to ‘shadow chains,’ and plasma in 2015. However, the most sustainable solution to Ethereum’s pressing problem lies in its switch to Proof of Stake (PoS). which will use sharding to break up large amounts of data into smaller chunks (ETH 2.0). That’s still far away.
Until then, Ethereum continues to make improvements. Co-founder Vitalik Buterin is openly committed to solving Ethereum’s scaling problem as quickly as possible using an optimistic layer 2 solution. It was said on Tim Ferris’ podcast earlier this month that he was enthusiastic that the roll up would allow Ethereum to scale by a factor of 100.
“If you have rollup, but no sharding, you still have a 100X scaling factor,” he said. “You still have the ability for the blockchain to go up to between 1,000 and 4,000 transactions per second, depending on how complex these transactions are.” No roll up date has been set yet, but it will likely become the dominant conversation topic for Ethereum scaling in the middle of the year.
In fact, with the launch of the Layer 2 solution by Optimism slated for this month, many major DeFi players have decided to integrate it into their protocols, including Uniswap, and Synthetix. This can have a major impact on Ethereum network congestion and high fees.
The Berlin update on April 14 could also have an impact on reducing gas costs. However, network congestion may not be resolved immediately; Ethereum has some major structural changes to go through before it can solve its problems.
The solution in question may be enough to patch Ethereum and the thousands of dApps built on it up to ETH 2.0. But, maybe not. After all, Ethereum does not operate in a vacuum. There is a lot of heated competition starting to propose real alternatives to Ethereum. Even with the largest developer community in the blockchain space and the most dApps; complacency can be a killer.
More Efficient Version of Stablecoin
We’ve already seen fast, robust and stable open-source Proof of Stake blockchains like Algorand and Tron giving traders the opportunity to transact with stablecoins like USDT and USDC on their network. Running the Algorand version (USDCa and USDTa) of one of these two stablecoins instead of their ERC20 version, for example users especially high-frequency traders who want to avoid the volatility of cryptocurrencies like ether and Bitcoin, can save a lot of time and money.
Algorand can process 1,000 transactions per second (TPS) enabling much-needed speed and throughput compared to Ethereum’s current 15 TPS. The fees are also almost nothing at around $0.001/transaction, regardless of size. And, beyond these huge benefits for stablecoin traders, developers looking to use the Algorand Standard Asset (ASA) protocol can create new tokens for use within their dApps that run on faster networks.
Of course, blockchains like Algorand may not have the same network effect as Ethereum, but if solutions don’t come quickly, it’s not impossible that dApps migration from Ethereum is starting to become more common.
Ethereum also faces more serious competition from other players in the blockchain space. Binance Smart Chain (BSC), for example, started making changes and even challenged Ethereum head-on with one popular dApp in particular, Venus (XVS). However, not all developers want to accept the trade-offs that involve building in BSC. Binance Smart Chain still relies on many centralized elements to offer low-cost transactions.
OKExChain, on the other hand, has been designed with decentralization at its core. As an open-source public chain with a focus on trading above all else, OKExChain also offers very high throughput and after completing a phased rollout, EVM compatibility as well.
This will be of great interest especially to decentralized finance applications and DEXs that can join the world’s first trading-centric public chain and migrate their dApps from Ethereum to trade, transact and grow at lower fees.
Blockchains with EVM compatibility, especially those with a high focus on decentralization, will challenge Ethereum’s dominance and offer more options to developers, merchants and all network users. They will also force incumbents to solve their scaling issues and offer a decent trading experience, which is a plus for all participants in the blockchain space.