Growing Ethereum fees and exorbitant costs of interacting with DeFi smart contracts threaten the growth of the industry.
The growing popularity of decentralized finance (DeFi) protocols over Ethereum (ETH) has contributed to the increase in fees, with the network processing high total fees of $ 6.87 million yesterday.
Synthetix (SNX) founder and CEO Kain Warwick warns that high fees are hurting DeFi’s growth. He told the press:
“Over the past three months, we’ve gone from an environment where DeFi was quite expensive to use and a bit slow, to now it’s hard for many people to accept.”
Ethereum fees have increased nearly 100% in the past 24 hours as congestion saw transaction costs exceed the previous high of $ 3.27.
While Ethereum’s average transaction fee is well above daily income in many countries, the additional smart contract execution required to interact with DeFi protocols has resulted in users reporting fees of up to $ 100.
Barriers to growth
The coin staking rush in the YAM protocol has seen many SNX manufacturers claim transaction fees of up to $ 99 when trying to claim weekly participation rewards. Reddit user posted on Twitter:
Asking for a $ 99 transaction fee is ridiculous. This will be a major obstacle to development if someone on the team does not solve this problem.
To minimize the exorbitant fees, Warwick revealed that Synthetix will launch its Level Two Optimism Virtual Machine (OVM) Ethereum scaling solution sooner than expected. Tested on testnet earlier this year, the L2 solution also allows several thousand transactions per second, instead of a handful of current TPS:
We are focusing on OVM and to be honest I think it will be done in 6 months. I think we will convert faster because it is probably one of our top three spearheads.
In theory, the solution works with any Ethereum smart contract.
Another blockchain opportunity
Level 2 solutions to Ethereum’s congestion problem have become increasingly important due to the delay in implementing ETH 2.0. Messari Product Manager Qiao Wang says Ethereum may face stiff competition from rival scalable blockchains:
“I changed my mind after using dozens of Defi platforms. Until ETH 2.0 is fully implemented, there is a clear possibility for a highly scalable blockchain to dethrone Ethereum. Paying a $ 10 transaction fee and waiting 15 seconds for it to stabilize is just a bad experience. ”