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- Ethereum DeFi sector is at a critical stage due to the soaring prices and transaction fees
- Many users building on the Ethereum network cannot afford such high transaction fees
- Prioritizing the Layer 2 solution can help the users to plaster the gaping wound
- The ETH 2.0 upgrade could be one of the factors affecting the future of the network
Ethereum (ETH) carrying DeFi and other Rival tokens is achieving new all-time highs in recent months. Investors’ excitement ahead of the Chicago Mercantile Exchange (CME) is one of the primary reasons for the soaring price.
According to data from Blockchair, on Thursday, following the surge in price levels the average transaction fee on Ethereum has crossed the mark of $20, creating a new all-time high. Indeed, the fees jump correlates with the general price run since earlier last month. However, these latest all-time highs have brought ETH tokens at a critical position.
Soaring transaction fees could kill Ethereum DeFi
The average transaction fee situation of Ethereum tokens is getting critical. The fee situation’s primary reason is the current doubling of the token prices without any significant upgrades. According to many in the cryptosphere, if the surge in fees continues then, it could dumb red hot decentralized finance (DeFi). Mostly the users of the DeFi products won’t be able to afford such high transaction fees.
According to a tweet by Weiss Crypto Ratings, if the token is unable to solve its Ethereum fee-related issues over the coming six months, then the competing ecosystems will have a large chunk of Ethereum’s market dominance.
Other projects, including Cardano, BNB, Polkadot, and Cosmos, will begin to launch their own decentralized applications or dApps.
Can the Layer 2 solution help the users to solve the issue?
The Twitter handle Weiss Crypto Ratings also claimed that the users building currently on Ethereum, should use Layer 2 (L2). L2 is mainly built for blockchain games, making no sense with current transaction times and helps against unnecessarily expensive blockchain fees. Moreover, it bundles the transactions together and splits the fee bill among the users. Prioritizing the L2 solution would help plaster the gaping wound.
Some other factors affecting the future of the ETH network
Many in the industry are still concerned about what will happen as Ethereum introduces a new Proof-of-Stake upgrade. Many conclude that Ether could be the most capable public blockchain if ETH 2.0 is not a gamble. However, the central problem of the PoS network is the ability of hackers who can mount a 51% attack. On the other hand, vast amounts of energy are also one drawback of the network. There are many more, but it is challenging to know how these programs will be implemented or the effects these programs will bring.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
