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DeFi's popularity has had a huge impact on Ethereum gas fees
Similar to Bitcoin's transaction fees, with Ethereum, users pay "gas fees", which is the price required to conduct a transaction on the Ethereum network. Typically these involve smart contracts that are often used in decentralized finance (DeFi). The gas fee is most commonly measured in gwei, which equals 0.000000001 ETH.
With the rise in popularity of DeFi and the complex contracts that are used to execute tokens like YFI, UNI, COMP, and others, the Ethereum gas fees have skyrocketed.
According to a recent OKEx Industry Analysis report, the release of COMP led to a huge demand for yield-farming projects, which drove up the number of transactions on the Ethereum blockchain. This led to the congestion of the Ethereum network and people paying higher gas fees to execute their transactions. As a result, the liquidity mining of DeFi tokens led to a sustained increase in daily gas fees over the past three months. The daily gas used reached an all-time high of $80.18 billion in early September.
Aside from the COMP token, other tokens have fueled the high gas prices when they all launched around the same time. YAM launched in mid-August, SUSHI launched in early September, and UNI just launched over a week ago. All of these forces combined ratcheted up the transaction fee prices and also increased the average gas prices too.
Just like when Bitcoin (BTC) hit high transaction fees, with a median per transaction fee of $29.96 in 2017, Ethereum is now facing similar issues where if this continues it will be unsustainable and users will be forced to look at alternatives.
The solution to high Ethereum gas prices is the ETH 2.0 planned upgrade, which is supposed to provide scalability and security to the network. ETH 2.0 isn't quite here yet, with it being released in phases with the first starting in 2020 and the final release happening after the year 2021.