Every Ethereum transaction requires a sum of ETH, denominated in “gwei” and dubbed a gas payment, in order to be processed. And as Ethereum’s decentralized finance sector is currently catching fire, demand to use the smart contract platform’s infrastructure has exploded.
In turn, the growing competition for Ethereum blockspace has recently pushed up gas prices to painful heights. Just last month, users groaned at the blockchain seemingly entering the 100 gwei era, amid which sub-100 gwei prices appeared unrealistic going forward.
Indeed, a gas price of 100 gwei roughly equates to $0.8 right now, and many Ethereum activities are composed of bundled series of transactions, so that charge can really add up even just for a single activity.
Fast forward to this week, and the blockspace frenzy has only intensified. At the time of this post’s writing on Wednesday, August 12th, the average Ethereum gas price was a whopping 287 gwei according to ETH Gas Station. That’s roughly $2.30 per transaction!
So What’s Going On?
In a macro sense, general usage of Ethereum has been uptrending all year as various ETH-centric sectors like DeFi, NFTs, and social money have been picking up serious steam as of late.
For example, Ethereum’s 30-day moving average of transaction fees has been outpacing Bitcoin’s 30DMA for going on nearly two months straight.
Ethereum’s 30DMA of fees has been higher than Bitcoin’s for 53 days now. Ethereum’s 30DMA fees are currently about 40% higher than Bitcoin’s. pic.twitter.com/h8CXjp3u2H
— Larry Cermak (@lawmaster) August 11, 2020
A big part of the recent surge of transactions has been the arrival of the “yield farming” craze in DeFi, where projects reward users with governance tokens for using their protocols.
And what we’ve seen lately as yield farming has taken off is that users are tending to rove from one hot yield farming campaign to the next as they’re released. The result has been massive acute migrations of capital to in-vogue…