Gas Fees Soar

Transaction fees now price out a significant percentage of ordinary users.

Ethereum has turned deflationary once again.

Over the past few weeks, price action and transaction volumes have picked up in the crypto world.

Buoyed by optimism that a spot ETF is just around the corner, bitcoin has rocketed by over 35% in the last month. Yesterday, BlackRock was confirmed to have applied to the SEC to launch a spot ETH ETF, adding $200 to ETH's price in a single day and pushing it above the $2,100 mark.

Congestion Strikes

However, renewed interest and activity in crypto isn't uniformly positive. Gas fees have risen sharply as networks become clogged with increased transaction volumes.

ETH gas fees (Chart: MilkRoad)
Ethereum gas fees spiked above 200 gwei yesterday

Gas briefly spiked above 200 gwei yesterday, and has repeatedly touched the 50 gwei mark over the past week. This drove the cost of some transactions, such as complex smart contract interactions, above $200.

Bitcoin's transaction fees have similarly increased, pushing above $15 yesterday, their highest in six months.

Gas: Ever Controversial

Gas is an important measure for network security and spam prevention. However, rising transaction fees price out everyday users, who are typically making smaller transactions. Instead, wealthy users and "degens"—essentially gamblers who take the hit on gas fees for the chance to make high returns—account for the majority of transactions. This hardly helps give blockchain platforms a reputation for banking the unbanked and democratizing financial services.

Airdrop hunters, in particular, complained about the gas cost of claiming free tokens.

L2s Back In The Spotlight

After a long period of time in which Ethereum mainnet gas fees were in single-digit gwei, users are once again struggling to transact economically—putting the spotlight back on L2 solutions and blockchains like Solana and BSC that have made a feature of providing high throughput but low fees.

Moreover, for applications that require huge transaction volumes, fees quickly add up even on L2s. SKALE, one of the fastest blockchain networks in the space, has an answer to this with zero-gas transactions.

SKALE has recently partnered with a number of applications where gas payments would represent either an untenable cost or deal-breaking friction to the UX. Gaming and AI are two arenas in which gasless transactions don't just make sense: It's the only possible approach.

Deflation Is Back

Higher activity on Ethereum L1 does have a silver lining. With gas fees increasing, Ethereum is now deflationary once again, with over 5,000 ETH being burned in the last week alone.

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