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Increase in Ethereum Gas Fees As Meme Coins Return
The Concern over Gas Fees on the Ethereum Network
Recently, there has been heightened concern in the Ethereum community due to the rapid increase in gas consumption on the network. Ethereum gas fees are used to process transactions on the blockchain and have risen significantly in the past few weeks. According to Dune’s data, shared by data scientist Hildobby, the median price of ETH gas, which is measured in gwei, surged to 87 and was averaged over seven days. The average transaction fee now stands at around $50, which is a substantial increase from the few months back when it was below $10.
Due to the high gas fees, many users find it almost impossible to perform even simple transactions on the network. This issue has caused frustration among small-scale users like decentralized application (dApp) developers, traders, and casual investors who are finding it hard to participate in the Ethereum ecosystem due to high gas fees. The infrastructural operators deserve to be compensated, but the high gas fees are making it difficult for anyone participating in the crypto community.
One Twitter user shared their reaction to the high gas fees when they attempted to buy a $20 NFT on Eth and the gas was around $40.
“Try to buy a ~$20 NFT on eth, and the gas is ~$40. Some ppl say the infra operators deserve to be paid. Sure, but imagine paying visa $40 fee for buying a $20 digital good… Infra should be affordable.”
The Memecoin Comeback
The surge in gas fees on the Ethereum network is primarily due to increasing demand for processing transactions on the network as memecoins return to the market after being silent for almost two years. The past few weeks have seen memecoin trading gain momentum, with most of these trades taking place on the Ethereum blockchain.
One of the memecoins viewed causing a significant increase in gas fees is PEPE, whose market cap soared by more than 100x within two weeks after its launch in mid-April. Other memecoins that have been hyped in the last few weeks include ArbDogeAI, WOJAK, and SHIBAI.
Simultaneously, the resurgence of NFT trading is another possible reason for the high ETH gas fees. While NFT trading volumes declined in April, reports show that they reached $4.7 billion in Q1 2023, a 137% increase from the previous year. Data from the blockchain intelligence platform Glassnode reveals that gas consumption from NFT-related activities on Ethereum increased by 94% between January and February.
Possible Solution to Gas Fees Issue
The Ethereum community is actively finding possible solutions to address the issue. This includes implementing an Ethereum Improvement Proposal (EIP) 4844 that aims to reduce gas fees and transaction throughput. This new proposal introduces a new type of transaction that accepts “blobs” of data, hoping to alleviate the problem.
Meanwhile, users are finding ways to adjust their strategies, such as performing transactions during off-peak hours when gas fees are relatively lower. Some even opt to switch to alternative blockchain networks with lower fees or use layer 2 scaling solutions like Polygon to reduce transaction costs.
