Ethereum gas fees have reached the highest values in a year

Ethereum is the most popular altcoin in the world by market capitalization, coming second only to Bitcoin itself. Since its emergence in the digital finance arena, the blockchain has also been widely recognized as a place of development, introducing the concept of NFTs and decentralized apps and finances. Nowadays, researchers are increasingly discussing the possibility that blockchain-based systems could provide revolutionary solutions for industries across the globe.

Binance, the largest exchange in the world, has recorded renewed interest in cryptocurrencies following their 2022 slump. 2023 started on a more positive note, with prices beginning to climb back up. And while they’re not yet back at their previous levels, investors are optimistic that the market is on the mend. Others, however, stress the importance of careful realism, as the values still record significant fluctuations.

Gas fees 

The Ethereum gas fees are the sums required in order to perform any kind of transaction on the network. Recently, the market recorded a considerable spike in the price of gas fees as a result of higher network engagement from investors. The costs offer compensation for the computational power required to perform transactions. Naturally, as several simultaneous transfers overlap, the price movement will inevitably be on an upwards path to make up for the demands.

During this time, if investors make the mistake of attaching low amounts of gas to their transactions, the transfer can end in failure. When there’s a high number of failed transfers on the blockchain, it’s a clear indicator that the market is overheating. The consequences can be highly divergent, and it’s difficult to predict which direction it can all go.

The prices could climb or drop, but since it’s impossible to predict with complete accuracy which one it will be, investors must be prepared for both and make sure their strategy can withstand any scenario. One thing’s for sure; the different movements will inevitably create volatility.

Meme coins 

One of the main reasons cryptocurrencies became so popular is because there’s always some hype surrounding them that keeps customers wanting to engage. One of the most prominent examples is the advent of meme coins, cryptos that derive from internet memes or jokes. The community associated with them is known for being very vibrant and eclectic. However, their status as unregulated financial products has led to the coins being banned in jurisdictions such as Thailand. In 2021, the nation deemed meme coins as goods with no clear objective and outlawed them.

Yet, a meme coin is currently at the center of the surge in gas fees. The Pepe coin has been in high demand lately, putting the blockchain under pressure. As of May 4th, the single-transaction cost on the Ethereum ledger is nearly $16. This is the first time for this type of movement since May 2022, yet the fees reached much higher levels in 2021, averaging between 50 and 70 dollars.

The emergence of the Pepe coin is believed to be one of the main factors driving the pricing spike. Over the first twenty-four hours since its introduction, its trading volume surpassed the $150 million mark and, by May 1st, had entered the ranks of the top 100 largest cryptocurrencies based on market cap. The overall valuation exceeds half a billion dollars and has been continuously ascending ever since, approaching a market trading value of roughly $900 million.

Analysts have determined that the smart contracts recording the highest engagement levels at the moment are the ones associated with meme coins, making up a large portion of the overall trading pools. As a result, several copycats have also emerged, and many internet memes have obtained their own cryptocurrencies.

For the gas fees, this means that the blockchain is currently burning approximately 9,392 ETH every twenty-four hours in order to support its transactions. In 2021, the Ethereum system executed a hard fork that destroyed some of the transactions. As activity levels increase, more coins disappear as well.

Major upgrades 

The Ethereum blockchain is well-known for its innovative measures, many of which have set the trend for the overall crypto community. Recently, in mid-April, the much-awaited and highly-anticipated Shapella update finally went live. And while its emergence improved engagement levels and caused prices to rise momentarily, the Ethereum blockchain still has a long way ahead.

Recently, developers have announced that the next major upgrade is in the final planning stages, meaning that investors likely won’t have to wait long before interacting with it. The future update, currently named Dencun, will include proto-dank-sharding tech. This technology is expected to reduce transaction costs, particularly those on Layer 2.

This layer has surpassed the mainnet by daily transactions since February, with approximately two million daily transactions. Six weeks ago, the network achieved a new peak of four million transactions in twenty-four hours. As of now, there’s no official release date, but if the proceedings move accordingly, it won’t be long until Dencun goes live.

Scaling solutions 

The price surges have led investors, developers and analysts to conclude that the best possible solution is for Ethereum to adopt a scaling tool. There are two possible solutions for layer two transactions, the zero-knowledge proof and optimistic. Both of them use rollups, which bundle transfers and execute them completely off-chain. This helps reduce the block space allotted for each transaction, resulting in cheaper gas fees across-the-board cheaper gas fees, as well as fixed costs. The expenditures can therefore be equally shared among the batched transactions.

The optimistic rollup gives everyone on the network a set amount of time to contest fraudulent activities, typically a whole week. ZK-type rollups use complex cryptography to determine the validity of a transaction. The process ensures privacy integrity and is fast and cheap.

As the cryptocurrency market continues to develop, there are several things to look for in order to ensure your transactions are successful. Make sure you pay close attention to the price fluctuations and avoid making any risky movements before looking over price charts. You’re more likely to obtain more revenue if you go in well-prepared.

Ethereum stands as the world's top altcoin, pioneering NFTs and decentralized apps. Amid fluctuating gas fees and the rise of meme coins, major upgrades like the upcoming Dencun aim to revolutionize transaction costs and further elevate Ethereum's significance.

Recently published

Yellow Cube

Stay in the loop. Subscribe for updates.

Get crypto news and the latest updates about our platform straight to your inbox.