Nov 10, 2023

Ethereum and Bitcoin Users Debate Scalability as Gas Fees Soar

Ethereum and Bitcoin users reignite scalability debate with surge in gas fees.
Ethereum, Bitcoin users reignite scalability debate as gas fees surge

A recent surge in transaction charges on Ethereum and Bitcoin has reignited the discussion around solutions for scalability and the role of layer 2s.

In the last 24 hours, cryptocurrency users started sharing screenshots displaying double or even triple-digit transaction fees on Ethereum and Bitcoin.

One screenshot showed gas fees reaching up to $220 for a high-priority transaction on Ethereum, while other screenshots showed figures around the $100 mark.

Moreover, Bitcoin users reported fees of around $10 for high-priority transactions. Although this is relatively low, the average Bitcoin (BTC) transaction cost has been hovering around $1 for the last three months, according to BitInfoCharts. BTC fees haven’t been this high since May.

At the time of writing, a transaction from an Ethereum hot wallet comes with a network cost of $45.65 for a $300 transfer on decentralized exchange Uniswap, according to a test transaction conducted by Cointelegraph.

The increase in gas fees have triggered proponents of Solana and other blockchains to promote how much more affordable transactions are on those respective chains.

One X (formerly Twitter) user, “Bobby Apelrod” noted that Solana only charges $55-60 per minute for all Solana users, while each “poor Ethereum user” had to pay that much for a single example of web 3.0 transaction.

“Currently, #PulseChain gas fees are 4’000X cheaper than Ethereum and 14’000X cheaper than Bitcoin,” said “KaisaCrypto.”

The cost of network fees is dynamic and is a result of demand or how congested the network is. An increase in on-chain activity often takes place in bull markets or when market sentiment is strong, but an added side effect is the impact on lower income users.

“How does this help the unbanked and lower income population,” Lopez iterated in a post which showed a “high priority” Bitcoin transaction fee of $10.50 on Nov. 9.

Prior to the fee spike, transaction costs on Ethereum averaged out at $11.35 on Nov. 8, according to BitInfoCharts. A few weeks earlier on Oct. 14 it fell as low as $1.40 — the lowest level recorded in 2023.

Gas fee on Ethereum peaked at $196 on May. 1, 2022, while fees were consistently above $20 between August 2021 and February 2022.

Scale the base layer or rely on L2s?

When it comes to Bitcoin and Ethereum, developers decided to prioritize decentralization and security at the base layer, while making transactions cheaper by utilizing layer 2s. Lightning Network is an example of offloading some of the transactions to a second layer, and Ethereum has a few layer 2s, such as Arbitrum, Optimism and Polygon.

Transactions on these layer 2 networks are often less than $1, but not everyone agrees this is the right way to address scalability. Justin Bons, founder of cryptocurrency investment firm Cyber Capital, suggests that the base layer should be the only transaction environment, and Solana is an example of a monolithic blockchain architecture in which consensus, data availability and transaction execution are all handled on the base layer.

On the other hand, Bitcoin and Ethereum have a modular blockchain design, as they offload some transactions to a second layer. Nevertheless, some have noted that Solana has suffered from network congestion, arguing that a modular blockchain design is a better approach to solve scalability.

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