Wednesday, January 19

Ethereum Rivals Also Suffering From High Transaction Fees | Bitcoin Portal


A few weeks ago, the debate over Ethereum’s high gas rates and usability heated up again at a time when opposing autonomous contract networks such as Solana and Avalanche are gaining traction.

However, gas rates are likely to remain a big issue in the Decentralized Finance (or DeFi) industry, no matter which blockchain you use.

Ethereum, the first and most popular top-tier blockchain with standalone contracts, is extremely expensive to use.

Simple token conversions at decentralized brokerages (or DEXs) can fetch hundreds of dollars, not to mention more complex DeFi activities like “yield farming” (profit-maximizing strategy).

And this is not a new phenomenon. If you think back to 2017, a little crypto game called CryptoKitties went viral and caused similar chaos in Ethereum’s gas rates.

Fortunately, gas rates have gone down. However, now, they have returned for revenge.

Ethereum Network Problems

In fact, throughout this bullish cycle, which we can say started in January 2020, fees on Ethereum remain a painful topic in the debate among users.

No doubt there have been peaks and troughs, but the average price of gas has never been higher for so long. That’s because, as the upward cycle continues, more users join the network every day.

Gas prices on Ethereum since January 1, 2020 (Image: Etherscan)

This narrative has been a boon to opposing first-bed networks, notably Solana and Avalanche. They present themselves as an equally rich experience as in Ethereum, without the prohibitive cost of transacting.

Over time, these networks have kept their promise.

Rates in Solana and Avalance

A group of the most recent transactions in Solana has a cost of just 0.000005 SOL or, at current prices, US$ 0,00107, a fraction of a penny. In Avalanche, the transaction price is also low, where the average cost reached 58 nAVAX or US$ 0,0000064525.

It is important to mention that only 1 nAVAX is equivalent to 0.000000001 AVAX.

For context purposes, depositing just USDC50 into the popular Aave borrowing and lending service on Ethereum costs around $156.

(Image: Aave)

The same transaction in Avalanche costs 0.01007 AVAX, or $1.13. Kevin Sekniqi, Avalanche’s chief operating officer, also said the rate estimates shown on popular crypto portfolios are incorrect. So even that $1.13 could be high.

(Image: MetaMask)

If you’ve just joined the crypto world and are just joining this debate, choosing one of the two blockchains is pretty easy. Spending around $1 instead of over $100 for the same service is obvious.

But if you’ve been in the Avalanche ecosystem for the past three months, you might still be a little irritated.

“Almost $2 for a small transaction on Pangolin,” said one editor do Reddit in August when using DEX Pangolin in Avalanche.

“It doesn’t seem like anyone talks about it. Only I care? How do you want to create P2E games [‘play-to-earn’] on here? I’ll probably go back to a blockchain with low rates.”

Another posted: “I’m pretty impressed with the speed of this network but, in terms of fees, the Polygon and Kucoin networks are much cheaper. I do over a thousand transactions/week, so AVAX is currently not for me.”

Sound familiar?

It’s basically the same debate the Ethereum community has had since the network began experiencing this issue in 2017. If Avalanche continues to gain more market share, expect many of these same issues in the future.

Sekniqi himself admitted who doesn’t expect Avalanche to process “thousands of transactions per second at low rates.”

Like Ethereum, Avalanche has a scalability solution to this problem.

Called “Subnets”, they are similar to the sidechains in Ethereum, which group activities outside the main network of the network and allow a higher processing rate and lower costs.

There’s a lot to be debated about the similarities and differences between both blockchains, but it’s understandable what’s going on here.

These types of networks are rate markets, where transactions compete for block space to be processed. As space per block fills due to a surge in activity, this market becomes even more competitive.

If you’re playing this game, as Avalanche, Solana, and Ethereum are, one of the main ways to alleviate competition is to increase block size (but of course there are others). This is basically what Solana and Avalanche did.

The downside here is that becoming an operator or node validator in such networks requires high hardware demands, as these blocks record a lot of data.

This can pose a risk of centralization as smaller participants are financially excluded from becoming operators or validators.

No matter how you split it: more activity inevitably results in higher prices.

To make matters worse, if we imagine that blockchain technology must be the foundation of all financial markets, the current environment created indicates that the future is likely to be expensive.

*Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co.



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