Ethereum Transaction Fees Hit May 2022 Highs, What This Means For ETH?

Ethereum transaction charges are as soon as once more hitting highs final seen since Might 2022. This improvement has raised considerations in regards to the influence on the Ethereum community utilization and its native cryptocurrency, ETH.

Ethereum, the second-largest crypto by market capitalization, is likely one of the main decentralized finance (DeFi) and non-fungible tokens (NFTs) platforms. The community has been experiencing a surge in exercise as a result of growing reputation of memecoins similar to PEPE, which has brought on charges to spike.

Rising Transaction Charges: A Trigger For Concern

On Might 2, the median common transaction charge on the Ethereum community soared to round 87 gwei, in response to Dune Analytics. This spike was primarily attributed to the elevated on-chain exercise surrounding memecoin buying and selling, in response to Hildobby, a pseudonymous information researcher at VC agency Dragonfly.

Memecoins similar to Pepe the Frog-themed token have been having fun with a renaissance lately, with the token value hovering over 266 instances in simply 4 days in April. The memecoin’s market cap rose to over $500 million this week earlier than crashing beneath $400 million once more.

Whereas this surge in exercise might point out growing curiosity within the crypto market, it additionally highlights considerations in regards to the community’s scalability and the influence of rising charges on customers. Excessive transaction charges can deter customers from interacting with decentralized purposes on the Ethereum community; because the charges improve, smaller customers are priced out of the platform and its purposes. 

Notably, the rise in memecoin buying and selling exercise, which elevated the variety of transactions on the Ethereum community, resulting in a surge in charges, has additionally made decentralized exchanges (DEXs) on Ethereum expertise the very best stage of customers since 2021. 

Dune Analytics information exhibits that Ethereum-based DEXs noticed a surge in quantity, with the entire buying and selling quantity on these platforms surpassing $63 billion in April alone. This represents a big improve from March, when the entire buying and selling quantity was round $31 billion.

What This Means For ETH

It’s price noting that the rising transaction charges on the Ethereum community are seen as a drawback to the worth of ETH, as customers might search different blockchains with decrease transaction prices. An occasion of that is the growing curiosity in different L1 blockchains similar to Solana (SOL), Cardano (ADA), Fantom (FTM), and so forth.

Nevertheless, Ethereum co-founder Vitalik Buterin lately instructed that the community might shortly scale as much as 100,000 transactions per second. This might assist alleviate community scalability considerations and cut back transaction charges.

Regardless, the elevated exercise could also be a optimistic signal of rising curiosity within the crypto market; nevertheless it has an costly value tagged. The rise in charges might discourage smaller transactions and result in a decline in demand for ETH. 

Wwith Ethereum’s scalability enhancements within the pipeline, it stays to be seen how the community will evolve within the coming months. In the meantime, ETH value has declined 0.4% after a possible surge to commerce above $2,000, final month.

ETH at present trades for $1.872 on the time of writing. ETH has a 24-low of $1,855 and a 24-high of $1,919, in response to information from CoinMarketCap. Whatever the market decline, the asset’s buying and selling quantity has solely ranged between $8 billion and $9 billion previously two weeks.

Featured picture from Shutterstock, Chart from TradingView