Skyrocketing Gas Fees, Behind the Prosperity of Ethereum
Editor's Note: This article comes fromChain reference (ID: lianneican), Author: Internal Reference Jun, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Chain reference (ID: lianneican)
, Author: Internal Reference Jun, reprinted by Odaily with authorization.
Transacting with the second-largest cryptocurrency has become increasingly expensive as transaction fees have ballooned. Judging from the current situation, the average transaction fee of Ethereum has risen from less than $0.10 in March to more than $0.55 in June. As Ethereum gas fees rise, the fee gap between the largest and second-largest cryptocurrencies is rapidly narrowing.
The rise in Gas fees, on the one hand, heralds the great prosperity of Ethereum, but on the other hand, it also reflects that the congestion of the Ethereum network is still hindering its development.
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What is Gas?
Similar to a diesel locomotive that needs gasoline to operate and drive, the Ethereum ecosystem needs Gas to operate and process transactions. The implementation of Ethereum's execution environment on the blockchain is called the Ethereum Virtual Machine (EVM). Every node participating in the network runs the EVM as part of the block validation protocol. They check the transactions listed in the block being validated and run code triggered by transactions in the EVM. Every full node in the network performs the same computation and stores the same value.
When a contract is executed due to a message or transaction trigger, every instruction is executed on every node of the network. This has a cost: for every operation performed there is a specified cost, expressed in gas units. Gas is commonly used in the Ethereum ecosystem, including the verification of various smart contracts and transactions. Ethereum Gas is usually expressed in Gwei (Ethereum unit). One Ethereum is equal to 1 billion Gewi.
Gas is the name of the execution fee that transaction initiators need to pay for each operation on the Ethereum blockchain. The name Gas is inspired by the fact that this fee can be used as cryptographic fuel to drive the movement of smart contracts. Gas can be purchased from miners who execute the code. Gas and Ether are intentionally decoupled because Gas units are aligned with computing units that have a natural cost, and the price of Ether (Ether) usually fluctuates with the market. The two are regulated by the free market: the price of gas is actually set by miners, who can refuse to process transactions for which the gas price is lower than the minimum. You only need to add a certain amount of ether to your account to get Gas. The Ethereum client will automatically purchase Gas for your Ethereum, and the amount is the amount you specify as the maximum expenditure of the transaction.
That said, since Ethereum is currently a proof-of-work blockchain, miners are responsible for processing and validating transactions on the Ethereum blockchain. Miners can dedicate computing power to solving mathematical puzzles to find the next block. The miner who finds the next block will receive block rewards and transaction fees from the transactions contained in the block. Transactions with low gas limits may fail after being abandoned by miners.
Gas fees are affected by blockchain demand, and miners prioritize transactions with the highest Gas prices. Therefore, as activity on the Ethereum blockchain increases, so does Gas usage. Since the transaction price of Ethereum is calculated by gas usage x day gas price, periods of high demand on the blockchain result in higher transaction fees on Ethereum.
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Ethereum’s daily gas usage has been on the rise since mid-2017, accelerating in recent months as on-chain transactions grew.
As transactions become more competitive, transactions will use more gas, be prioritized and validated by Ethereum miners, ultimately making transactions more expensive for the sender.
In addition to being the largest ERC-20 token by market cap on the Ethereum blockchain, Tether (USDT) has also seen a recent surge in demand as transactions on the Ethereum blockchain surge. According to data from CoinMetrics, the 14-day average of USDT transactions on the Ethereum blockchain continues to trend upwards.
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Ethereum Network Utilization
