Under the DeFi boom, the resources on the Ethereum chain are tight, and the bull market has not yet reached the "big congestion"?

Ethereum, the number one public chain in the blockchain world, has seen its transaction fees skyrocket again recently.

From ICO in 2017, to Fomo 3D in 2018, to DeFi in 2020, every upsurge in the development of Ethereum will lead to network congestion. It can be said that the development history of Ethereum is a history of skyrocketing transaction fees .

Recently, with the popularity of the DeFi ecosystem, the number of unconfirmed transactions on the Ethereum network has reached about 120,000, the network utilization rate has exceeded 95%, and the average transaction fee has reached the bull market state in early 2018.

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Current status of resources on the chain

According to data from Etherscan.io, there are currently 127,490 unconfirmed transactions on Ethereum, and this number is showing a gradual upward trend.

In addition, as early as June 23 this year, the blockchain analysis company Santiment analyzed that more than 100,000 new ETH addresses will be generated every day. According to the bitinfocharts website, about 1.15 million transactions are confirmed every day, compared with 850,000 a month ago. Currently, the figures show no sign of a decline.

In fact, if you strictly compare the transaction history of Ethereum, a situation like this only appeared at the end of 2017, when Ethereum was at the peak of its historical bubble.

In terms of transaction fees, data shows that miners have obtained more than 2,500 ETH through transaction fees every day for more than a month. Although this data is far lower than the highest record at the end of 2017, the data has lasted for a long time, and the highest transaction fee in history at the end of 2017 only lasted for a short period of time.

Another data that can fully explain the popularity of the Ethereum network is the miner fee reward.

For miners, mining rewards consist of block rewards and handling fee rewards. Within a certain period of time, miners' block rewards remain unchanged, but handling fee rewards will increase with the increase in transaction activity.

Since July, the proportion of Bitcoin miners’ fee rewards to mining rewards has shown a downward trend, currently accounting for about 4.2%. However, Ethereum miners’ fee rewards have shown an explosive trend, accounting for 19.4%. The data did not show a downward trend, and it is expected that as DeFi continues to be popular, the data will reach a higher state.

The popularity of data on the chain is also reflected in user experience.

Qiao Wang, Messari’s former head of product, reportedly shared the frustration. To interact with a DeFi smart contract, he spent $10. The analyst wrote:

“As long as Ethereum 2.0 is not fully live, a highly scalable blockchain clearly has the opportunity to dethrone Ethereum from the throne and replace it. The $10 transaction fee and 15 second settlement delay shows that this is nothing more than a bad UX.”

Since each DeFi transaction can cost several dollars, relatively small investors as well as Ethereum users, as well as tokens developed based on Ethereum, are under pressure from high transaction fees. For an individual, if it costs $5 to get $100 worth of ETH, it doesn't seem to make sense to continue trading.

However, transfers of larger amounts may not be affected.

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Causes of massive resource consumption on the chain

The massive consumption of resources on the chain is closely related to the popularity of DeFi, MMM and other funds, and stable coins.

According to the latest data from the website, the top ten most popular applications on the Ethereum network are USDT, SmartWay Forsage, Uniswap, MMM, Easy Club, Nest Protocol, 1inch Exchange, Argent, IDEX, and Kyber Network. Contributed 97% of the handling fee.

Among them, USDT alone contributed 34% of the transaction fee to the Ethereum network, which means that the Ethereum network is basically serving the 10 most popular applications.

In fact, these most popular applications can also be divided into several categories, such as Ponzi scheme applications represented by MMM, stable currency applications represented by USDT, and DeFi applications represented by Uniswap.

Let’s first look at the Ponzi scheme applications represented by MMM.

Open the MMM website, you can see a very eye-catching headline, "Russia's greatest Ponzi mastermind is dead, but his legacy lives on in the crypto world", that is, Russia's greatest Ponzi schemer has passed away, but his legacy remains circulated in the crypto world.

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Sergei Mavrodi

In addition, there are Ponzi scheme applications like SmartWay Forsage, Million Money 2.0, Easy Club, etc., which also add burden to the entire Ethereum network.

For example, SmartWay Forsage has hundreds of investors participating every day when users are most active in June.

The gameplay of this type of application is basically a pyramid structure, that is, the latecomers contribute cash flow to the previous investors. Once no new blood enters, the game will be over, and the organizers can only change the brand to reopen.

The second type of application that causes resource constraints on the Ethereum network is stable currency applications like USDT.

According to data from ethgasstation.info, USDT has always been the largest contributor to the GAS fee on the Ethereum network. In the past 30 days, it has contributed more than 11,700 ETH to the Ethereum network, becoming the "carrying handle" of Ethereum network applications. son".

USDT's dominance is not accidental.

At present, USDT has a circulation market value of 9.1 billion US dollars, surpassing XRP to become the third largest cryptocurrency in the world, of which more than 80% of USDT is issued on the Ethereum network.

Secondly, the ever-popular DeFi this year has also increased the burden on the ETH network.

According to DeFiMarketCap data, the total market value of DeFi project tokens exceeds US$8 billion, and is now reported at about US$8.026 billion. Two months ago, this figure was only US$1 billion. The total value of locked assets in DeFi reached 2.234 billion US dollars, Compound ranked first with 680 million US dollars accounting for 30.48%, Maker’s total locked assets value was 626 million US dollars, and Synthetix’s total locked assets value was 393 million US dollars.

At the same time, according to dappradar data, the total number of DeFi applications reached a recent peak on July 2, with around 7,000 users, while this figure was only around 2,000 in May.

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Can ETH2.0 solve the problem

Traditionally, the congestion problem can be alleviated by increasing the gas limit of a single block of Ethereum, but this is not a once-and-for-all solution.

Take the last two expansions of the block gas limit as an example.

In the second half of 2019, the miners voted and agreed to increase the block Gas Limit of Ethereum from the original 8 million Gas units to 10 million, which increased the size of each block by about 25% compared with the previous block. This theoretically improves the TPS of the Ethereum network.

But soon, the block limit is filled.

Since then, Ethereum miners voted to increase the Gas Limit of each block from 10 million to 12.5 million. At present, the proposal has been successfully voted and passed on June 19, making the network more powerful. The transaction capacity, but the transaction fee is still high, which is the status quo of the network we mentioned in the first part.

So, can Ethereum 2.0 work?

Ethereum 2.0 is an all-round upgrade to the Ethereum blockchain, which will fundamentally change the way the network operates. The upgrade, which has been in development for several years, is expected to dramatically increase the number of transactions Ethereum can handle, thereby reducing fees and improving usability.

Although Ethereum 2.0 has not yet launched, according to the developer responsible for the programming and integration of Ethereum 2.0, the first phase of this upgrade is expected to be launched in 2020. Vitalik Buterin himself confirmed this.

However, for those investors who are worrying about high transaction fees, the first phase is expected to activate only a small part of the Ethereum 2.0 technology, and it may take a year or several years before it really works.

The development process of Ethereum 2.0 involves sharding, voting, and committee consensus. Any error in any program seems to have a negative impact on this upgrade, and then cause major delays.

Therefore, at present, the high transaction fee of Ethereum may be an unsolvable problem.