In the past month, meme coins have been the main narrative that the speculators are trading on and in addition to causing a surge in gas fees, a handful of traders have profited handsomely off their meteoric rises.
ERC-based PEPE has been the torch-bearer of this rally and reached a market cap of $1.7 billion after news about it being listed on Binance. On the other hand, Bitcoin Ordinals via BRC20 has rocked the Bitcoin market with ORDI token registering $90 million trading volume within 12 hours of listing. Daily BTC fees paid to process blocks have reached levels not seen since 2018.
(Source: Into the Cryptoverse)
What’s more absurd is that, for one particular block, the transaction fees paid are higher than the block fees (6.25 BTC that miners earn currently). That’s a first! Miners are happy – the more the fees paid, the lesser the impact of halvings.
Ethereum fees are steep as well
Gas fees are charged for processing transactions on the Ethereum blockchain, and they have been rising at an alarming rate.
(Source: ycharts.com)
The sudden onslaught of increasing gas fees has led to a decrease in trading activity among small-scale users, as it has become increasingly expensive to perform a simple transaction on the network.
This has sparked a debate among developers, traders, and retail investors who are finding it difficult to participate in the Ethereum ecosystem due to the gas fees. Okay, so what is likely to happen now?
1) Users are demanding a change
This is not the ideal way to promote blockchain adoption. If users are unhappy, the developers must do something about it. While Ethereum already has a roadmap to reduce fees over time, some in the Bitcoin developer community have called for removing Ordinals from its network (link).
However, tech changes in blockchain take time to evolve – we can be confident that some solution will be found to ease the network congestion over time though short-term pain can ensue.
2) Role of Layer 2s and Lightning Network
Layer 2 infrastructure already claims to have the scaling solution that Ethereum needs. Arbitrum, Optimism and Polygon are the top ones currently and are doing a decent job. Lightning Network on Bitcoin does a similar job with Binance already contemplating integrating with its platform (link).
Now it leads us to the question – what should you do?
a) Be patient: Challenges with tech are not new. The great thing about tech is that it finds a way to solve itself over time. Blockchains (especially BTC and ETH) are here to stay but they need to be more scalable and convenient to its users. Continue to read up on the developments around this and take strategic calls in the medium term.
b) Understand the scaling solutions: Scaling solutions can offer good value to users by negating some of the pain. They can be prime candidates for growth in the next bull run. Also, other top blockchains such as Cardano and Solana will claim victory with respect to gas fees but hey, they haven’t had that many meme coins going crazy on them yet have they?
