The sharp increase in Ethereum transaction fees is a hindrance to crypto adoption.
Over the recent weeks, there has been a substantial increase in transaction fees on the Ethereum (ETH) network, resulting in elevated costs for crypto transactions. Etherscan data reveals that the average fee for ETH transactions on November 12, 2023, stood at $6.64, representing a 219% surge from the $2.08 recorded on October 22, 2023.
This surge in transaction fees is influenced by various factors, including a heightened demand for ETH, an expanded use of smart contracts, and a lack of upgrades in network capacity.
The demand for ETH has grown parallel to a significant surge in its price over the past few months. On November 12, 2023, ETH reached an unprecedented peak of $5,200.
The increased adoption of smart contracts has also played a role in the upswing of transaction fees. Smart contracts, applications that operate on the blockchain network, are commonly employed for diverse purposes such as decentralized finance (DeFi) applications, gaming, and non-fungible tokens (NFTs).
The absence of upgrades to network capacity has contributed to the rise in transaction fees. Ethereum utilizes a proof-of-work (PoW) system to secure its network, requiring miners to solve mathematical puzzles for transaction verification.
The increase in Ethereum transaction fees poses a potential obstacle to widespread crypto adoption, as high transaction costs may make crypto transactions financially inaccessible for certain individuals.
In response to this challenge, Ethereum is undergoing developmental efforts to improve its network capacity, a project known as Ethereum 2.0. Ethereum 2.0 will introduce a proof-of-stake (PoS) system for network security, eliminating the need for miners to solve mathematical puzzles and potentially significantly increasing network capacity.
While Ethereum 2.0 is slated for release in 2023, the exact release date remains uncertain.
