ETH High Gas Fee Crisis Can’t Be Solved By EIP-1559: Coin Metrics

The ETH high gas fees crisis cannot be solved by the EIP-1559 upgrade according to a report by CoinMetrics as full blocks are the main reason the gas prices reached all-time highs so let’s read more in our recent ethereum news today.

A report by Coin Metrics discussed the world of ETH transaction fees noting that they are at the highest level ever recorded and the awaited network upgrade is unlikely to solve the problem. according to the Gas Report, median fees on the ETH network have been over $10 for most of the year while comparatively, the average ETH transaction fees reached just $5.70 during the 2017 bull run. It attributed some of the increase to the increase in the ETH prices which will make gas even more expensive so, since the start of 2021, ETH surged 125% to current prices despite the recent correction of 19% from the ATH of $2050. However, over the same period, the median gas prices increased by 532%.

The different types of transactions require different amounts of gas which is a simple ERC20 token transfer that uses less gas than complex smart contracts for automated market makers for example. It also noted that rather than Defi being the issue of the high gas fees, it is simply even more transactions:

 “Since January 2020, the amount of gas used per transaction has trended downwards. This shows that increased transaction complexity is not responsible for high transaction fees.”

ETH transactions are not auctioned with those paying more gas taking miner priority and will get faster transactions than the ones that set lower gas limits. The report also noted that the high fees are at that level because the blocks are full at 95% and they have been since the 2020 DeFi boom. Also, we can read that the miners have to specify which transactions to include when mining new blocks and each block that can only include a limited number of transactions because of the maximum block size:

 “So miners naturally prioritize the transactions with the highest gas prices since they will earn them more money if these transactions are included.”

The report also concluded that the EIP-1559 network upgrade cannot solve the ETH high gas fees crises because only scaling solutions will be the true long-term fix:

 “If Ethereum can only process a few hundred transactions (on average) per block, there’s going to continue to be high fees as long as DApp usage keeps increasing. Gas prices will continue to be high as long as there’s high competition for block space.”