Ethereum Network Gasps for Air: NFT and Memecoin Boom Sends Gas Prices Through the Roof
The Ethereum ETH/USD the network has recently been confronted with a worrisome issue for users – the rising gas consumption rates on the platform.
Gas fees, which are imposed to process transactions on the Ethereum blockchain, have increased at an alarming rate. Computer scientist Hildobby shared information from Dune, which reveals that the median ETH gas price, measured in gwei and averaged over a week, reached 87.
This peak has not been seen in the last year – since May 2022.
The average transaction fee is now around $50, a marked increase from just a few months ago, when it was under $10.
High gas taxes have led to user dissatisfaction, as even simple transactions have become increasingly expensive.
Many users, such as dApp developers, traders and retail investors, find it challenging to engage in the Ethereum ecosystem due to exorbitant gas fees.
The main reason for this problem is the growing demand for transaction processing on the network, driven by the re-emergence of memecoins in the market after almost two years of silence.
In recent weeks, memecoin trading has accelerated, with the majority of activity on the Ethereum blockchain. PEPE, a memecoin whose market capitalization topped $1 billion within two weeks of its launch in mid-April, serves as an example.
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Other memecoins that have experienced significant hype include ArbDogeAI (AIDOGE), WOJAK WOJAK/USDand Ai Shiba SHIBAI/USD.
Another contributing factor to increased ETH gas fees is the resurgence of NFT trading on the Ethereum blockchain. While trading volumes fell significantly in April, reports show that they reached $4.7 billion in Q1 2023, a 137% increase from the previous year.
Glassnode, a blockchain intelligence platform, revealed that gas consumption for NFT-related activities on Ethereum rose by 94% between January and February.
The Ethereum community is working hard on solutions to alleviate this problem, such as the introduction of Ethereum Improvement Proposal (EIP) 4844.
The proposal aims to reduce gas fees and transaction throughput by incorporating a new transaction type that accepts “blobs” of data.
Meanwhile, users have had to adapt their strategies.
Some have chosen to transact off-peak when gas fees are typically lower, while others have migrated to alternative blockchain networks with lower fees or adopted layer 2 scaling solutions such as Polygon MATIC/USD to cut transaction costs.
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