Important facts:
In May 2021, the average daily commissions hit nearly $ 70.
Many hoped that EIP-1559 would fix the problem, but it didn’t.
In addition to the continuation of the DeFi mania that began in 2020, there were also new trends in the Ethereum ecosystem in the year ending. Among them, due to their popularity, the increase in the business of non-fungible tokens (NFT), video games for earning cryptocurrencies (play-to-earn) and a new memecoin stand out.
Together with the large flow of new users that these products have gained, the network congestion has intensified and subsequently the price of the fees necessary for its operation reached record highs.
The average fees for Ethereum (measured in dollars) started the year at $ 3 and ended at $ 27, as seen in the BitInfoCharts explorer. The annual and historic record was hit on May 12, 2021 when it hit a daily average of nearly $ 70.
In March, we began to glimpse the NFT mania. That month, Google searches for the term “NFT” exploded worldwide. They started a mostly upward trend that continues to this day.
A few months later, the Axie Infinity game gradually became massively popular. Testimonials from different parts of the world of people who have earned tokens for playing this video game circulated on the network encouraging new people to try it out. The Ethereum ecosystem was thus filled with for-profit players.
In addition, a new dog made a name for itself in the cryptocurrency area in May: the Shiba Inu Memecoin (SHIB). Despite the racial division, it differs from the classic Dogecoin (DOGE). It is that Shiba does not have its own blockchain, but it is an Ethereum token.
Unfortunately for all Ethereum users, when the price of Shiba Inu began to rise, the FOMO (fear of being left out) increased the network’s commissions as well.
The high commissions in Ethereum do not make the user experience pleasant. Source: BitInfoCharts / bitinfocharts.com
EIP-1559: Frustrated Hope for the Ethereum Community
Many Ethereans place their hopes on the EIP-1559 upgrade proposal. This implementation, which has been worked on for several years, changes the tariff system in Ethereum: Each transaction pays a base fee that is burned and a tip that goes to the miners.
Although the main aim of this improvement proposal was not to lower tariffs (this is seen as a secondary consequence in the long term), many have understood and disseminated it.
There was great disappointment among those who hoped to be able to operate their preferred decentralized applications (dApps) at low tariffs after the approval of EIP-1559.
The proposal was activated in block 12,965,000 on August 5, and since then no material changes have been noted in relation to the amounts paid to operate the network created by Vitalik Buterin.
EIP-1559 has not achieved the target of lowering anticipated by many
Fees in Ethereum. Source: @Yazanator / twitter.com
Other blockchains are taking advantage of Ethereum’s bad moment to grow
Given the above situation, many users of different dApps turn their eyes to other blockchains. Although they are not distinguished by their decentralization, Binance Smart Chain and Solana, for example, took up a large chunk of the market decentralized funding, non-fungible tokens and games to win cryptocurrencies.
Also Polygon (formerly called Matic) grew exponentially in 2021. Unlike the networks mentioned in the previous paragraph, the latter presents an Ethereum-friendly narrative. It is presented as a side chain that tries to relieve the main network. In fact, it is often mistaken for a second coating solution.
This has led to many platforms that were originally designed only for Ethereum also expanding in the direction of polygons. These include the decentralized PoolTogether lottery, the 1inch exchange and the non-fungible token marketplace OpenSea.
The fees with Polygon are significantly cheaper than with Ethereum. Source: Polygon.
Rollups, the new hope for Ethereum
Now the new hope of the Ethereans for a scalable, fast and inexpensive network is in the second-layer solutions, more precisely in the rollups.
It has already been generally assumed that even with Ethereum 2.0 (the new version of the network that uses the Proof of Stake, PoS), the fees will remain high, at least in the initial phase.
The new roadmaps for Ethereum are rollup-centric and the creator of the network cannot imagine a future without these scalability solutions.
the Rollups “package” transactions and enable them to be executed outside the mainnet (or mainnet). These transactions can be Ether (ETH) shipments, tokens or smart contract signatures.
With the increased use of rollups, two things are expected. On the one hand, improve the usability of the Ethereum ecosystem by enabling fast and inexpensive transactions in rollups, albeit more centralized. On the other hand, it is expected that the main network will be relieved and even at this base layer – which is necessary to ensure decentralization – the user experience should be more satisfactory.
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