Calls for a scalability upgrade in Ethereum 2.0 are beginning to get louder after its gas price has surged to staggering levels over the past week.
It can now cost users up to $50 to send even a small fractions of Ethereum as investors begin to flock to decentralised platforms like Uniswap.
According to data from ETH Gas Station, in the past 30 days users have spent 12,100 Ethereum in gas fees, equating to around $4.6 million.
When looking at the Etherscan chart for average gas prices since 2016, aside from a couple of anomalies earlier this year it is creeping back to levels not seen since December 2017, at the height of the ICO bubble and the crypto kitties trend.
Crypto Kitties is an Ethereum-based game that creates unique non-fungible tokens that can be traded with other collectors. At one stage people were buying and selling these NFTs for more than $200,00, prompting the Ethereum blockchain to become congested and thus inflating the gas price.
I don't think I ever remember seeing gas prices this high… DeFi is going to wreck Ethereum… pic.twitter.com/3NZ9XaVfHL
— Luke Youngbrrrr (@LukeYoungblood) August 12, 2020
This time around the unsustainable rise in gas prices isn’t to do with people trading NFTs, it is as a result of those staking and investing in DeFi tokens, most of which are based on Ethereum.
As reported yesterday by Coin Rivet, the Yam Finance platform attracted more than $400 million in DeFi tokens before eventually meeting its demise due to a malfunctioning rebase protocol.
In terms of how mounting gas prices will affect Ethereum in terms of value, it very much depends on the trajectory of Bitcoin. If Bitcoin begins to surge and people attempt to liquidate Ethereum to catch the move, it will eventually fall as investors will be frustrated at the network’s lack of efficiency.
If, however, Ethereum begins to rally by its own accord, it could experience a wave of FOMO as investors trapped in erc-20 tokens will desperately be trying to sell back into Ethereum, thus resulting in a more volatile move to the upside.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.