Ethereum’s ubiquitous high mining fees

In August, total Ethereum miner fees reached a record high of $8.6 million in a single day.

After a brief respite (coinciding with the collapse of YAM Finance), total miner fees have begun to climb again. The latest data shows that total GAS fees reached $7.1 million yesterday.

Total daily gas fees on the Ethereum network. (Source: coinmetrics.io)

The community is currently discussing the sustainability of the Ethereum network. Long waiting times and high mining fees have already worsened the user experience for many users.

In mid-August, when total fees peaked, average GAS fees also hit an all-time high of $6.62. Currently, the average transaction fee is $5.99, dangerously close to the highs seen in mid-August.

Source: bitinfocharts.com

Many have blamed the phenomenon of network congestion on the popularity of decentralized finance (DeFi) protocols. However, the DeFi craze looks set to continue, and with it, the price of GAS .

With this in mind, Shapeshift CEO Erik Voorhees made a prediction for the current sky-high miners.

He believes that the Ethereum network will grind to a halt under the weight of DeFi transactions, which will cause developers to turn to other Ethereum-compatible chains to meet demand while ETH 2.0 is still under development.

“Prediction: Ethereum gas fees destroy DeFi for regular users (until Ethereum 2.0 in 2 years). To meet demand, developers will start quickly porting DeFi components to solutions like Cosmos that are apparently already compatible with Solidity via the just-launched Ethermint.”

Ethereum 2.0 Touted as Solution to Soaring Gas Fees

The cost of using the Ethereum network remains a significant challenge for stakeholders. This is a fact that has not yet been addressed by the core developers, who are working hard to resolve the issue.

As early as April 2019, core developers proposed Ethereum Improvement Proposal 1559 to address the problem of rising transaction fees.

As we can see now, the current auction mechanism is completely inadequate because it gives miners control over fees. What the developers hope to achieve with EIP 1559 is to implement a variable base fee process.

“Because these basefees are constrained in their changes, the maximum difference in basefees between blocks is predictable. This allows wallets to automatically set gas fees for users in a highly reliable manner.”

More importantly, a key component of the system is that miners only receive a small premium on the base fee, which itself is burned.

Under this system, miners have no incentive to manipulate fees to extort mining fees from users. As good as 2.0 sounds, as Voorhees implies, Ethereum 2.0 is still many years away from being truly completed.

While the Phase 0 rollout of ETH 2.0 is scheduled for the end of this year or early 2021, the upgrade refers to the implementation of proof-of-stake and the establishment of a validator registry.

Phase 1.5 (mainnet sharding) may solve the problem of high gas fees. Ethereum developers believe that phase 1.5 will be ready in "2021".