- Ethereum network usage and gas fees may pose a risk to DeFi expansion
- Not all smart contracts can thrive on the network considering the current fee level
- The situation might prevent the migration of apps to competing networks
Ethereum news today – The total number of network transactions on Ethereum has tripled in 2020. The figure is now identical to what was seen in the all-time high from January 2018. Even though the situation may appear bullish, remember that both EOS and Tron started as ERC-20 tokens. After this, they launched their mainnets and began to run as fully independent Blockchain networks. Similar chain migration is currently ongoing on Tether’s USDT (a stablecoin that recently posted a $12 billion market cap). As Ethereum’s transaction fees rose throughout last year, a similar movement has happened in Tether in the past year as well. At the time some Tether holders opted for Tron. This was happening as median Ether transaction fees rose threefold to $0.14 back in July last year. Even though this seems insignificant when compared to the current rate of $3.
Can Ether-based Networks Survive the Rise in Transaction Fees?
To better calculate the odds of the extra outflow from Ethereum, we must analyze the type of transactions happening. For example, stablecoins have lesser incentives to withhold during network constraints. Switching networks on DeFi apps like Maker and Compound appear less obvious. Other smart contract platforms have disadvantages and a smaller ecosystem. According to Data given by Etherscan, there has been a growing use of DeFi (Decentralized Finance) apps on the network. The question is how sustainable are the numbers mentioned considering the current transaction rates? According to data from DefiPulse, the total value of DeFi grew impressively by five-fold in the last 90 days. Despite been astounding, the question is how many of these transactions are related to the high rate?
Not All Smart Contracts Can Thrive With the Current Fee Rise
The above analysis is a positive indicator that despite the recent increase in transaction fees on the Ethereum network, some oracle and DeFi apps will have the capacity to withstand it momentarily. The network’s rising transaction rates have been facilitating second layer solution developments on several DeFi apps. Even though the overall impact that it has on Ethereum may appear positive, it might still prevent the migration of apps to competing networks. This certainly doesn’t paint a good picture for everyone (including investors and the public). No wonder the Ethereum 2.0 solution (that has been in the development phase) is now under immense pressure more than ever to deliver. The solution must now provide a network that can better address the growing demand in stablecoins, decentralized exchanges, oracles, and DeFi.