Ethereum Gas

Looking back at the trend of the crypto market in the past year, we can find that concepts such as DeFi, GameFi, Metaverse and web3.0, MEME, and emerging public chains have been hyped by the market. Obviously, the market is also pursuing new hot spots and Ethereum handling fees are also soaring in the bull market.

Why Ethereum fees keep rising

This round of bull market is mainly started by Ethereum DeFi. Investors basically pay much more than normal transfer fees when interacting with ETH DeFi smart contracts, and AMM market-making DeFi projects like UniSwap requires high timeliness for investors' transactions, investors must complete the transaction exchange of tokens in a short time, usually within two or three minutes, The price fluctuation is about 5%. Therefore, investors will choose higher handling fees in order to confirm the transaction on the chain in time.

The concepts of NFT, chain games and metaverse, and some well-known projects gave users high airdrop returns on Ethereum, which intensified people's enthusiasm for airdrops, so the usage of UniSwap and OpenSea on Ethereum has always been High ever.

Exploration of fee reduction scheme

The soaring transaction fee on the chain has caused the community to seek solutions. The market is mainly divided into three directions. The first is to expect EIP-1559 to destroy miners’ income. Many self-media believe that this solution can improve the ETH price, thereby reducing the fee denominated in legal currency that people spend on ETH. After all, ETH is more expensive, and corresponding people cherish ETH more and will not spend ETH recklessly. However, it turns out that EIP-1559 not only cannot reduce the handling fee, but also has the opposite effect.

The second solution is the side chain and the competition chain. Some people used to call Polygon the Ethereum side chain expansion solution. Now it seems that Polygon is more like a separate public chain. Polygon has its own token certificate, and the previous competition Chains such as BSC, HECO, Fantom, xDAI, celo, etc. have all begun to snatch the Ethereum market. The main feature of this part of the public chain is that it supports EVM virtual machines, which means that the smart contracts running on Ethereum can run directly on this part of the public chain without too much modification.

The prosperity of the competition chain mainly has two parts. The first is that the application can be rolled out on a large scale and quickly, thereby attracting a large number of players to participate, and it can also meet the urgent needs of the market. The second is a relatively mature cross-chain DApp. Cross-chain enables people to easily transfer assets from one chain to another.

It is reasonable to say that the Ethereum fee should be reduced, but the NFT and MEV increaseing the fee in market. NFT gradually prospered in June 2020 and reached a peak in September, followed by chain games development., thats the reason NFT market has always accounted for the majority of Ethereum transactions, so to a certain extent, this can indicate that competing chains are not enough to attract Ethereum DeFi overflow funds. We can think of MEV as an arbitrage mechanism with first-mover advantage in on-chain transfers. The MEV program finds arbitrage opportunities on the chain and will use higher handling fees for arbitrage, which to a certain extent aggravates the rise of Ethereum fees.

Only strong projects can gain a foothold on Ethereum, which is what we often call the head effect. In addition, some heavyweight airdrops such as ENS are all given to users on Ethereum by the project party, so people have a deeper understanding of this kind of airdrop.

Rollup

In fact, the third solution is Rollup. Rollup once became the focus of many people attention, but the current development is not hot, which is beyond people expectations, many people were counting on this kind of rollup solution to solve the pressing problems for Ether, but the progress is slow. Therefore, many people are disappointed.

The proposal of Rollup is actually relatively early, but what really attracted the public attention is bull market. Due to the relatively high innovation at the technical level, the development difficulty is relatively high, so the deployment of applications will naturally be much slower. In contrast, the speed brought by the competition chain + cross-chain bridge is very fast, so the competition chain can develop but Rollup has not improved yet.

So does this mean that Rollup is useless? In fact, according to our past experience, Ethereum Rollup will definitely develop and become a market hot spot for a period of time. In fact, the reason is relatively simple. Most of the development of new technologies in Ethereum will takes time to wait and shine.

To sum up, the rise of Ethereum fees is eliminating small retail investors in the market, which is beneficial to Ethereum to a certain extent. On the one hand, it can inhibit investors from short-term operations on Ethereum, and on the other hand, Ethereum has become an aristocratic chain, so that only rational and powerful investors such as institutions or large investors can participate, and the price will not fluctuate easily due to market factors. These are great benefits for Ethereum, while applications on other competing chains may appear bleak due to the arrival of the bear market. However, it still needs a long time for public chain applications to develop and maintaining a prosperous growth.