Ethereum’s return to all-time high accompanied by 77% rise in transaction fees
A 31% price surge was accompanied by a 77% rise in the cost of transacting on Ethereum.
Ether (ETH), the second-largest cryptocurrency by market capitalization, returned to an all-time high on Friday when the spot price for each unit of ETH exceeded $2,000.
Meanwhile, the ominous specter of Ethereum’s unwieldy transaction fees made itself felt once more, as the cost of using the blockchain rose 77% across the past few days, in line with a 31% increase to the ETH coin price.
Ether recorded green candles for eight of the past nine days, as the coin price rose from a recent bottom of $1,530 on March 26 to the $2,009 valuation witnessed at the time of publication.
Transaction fees summarily jumped 77% across the same time period, as the average cost of transacting on Ethereum rose from $12.96 to $22.97, according to data from Bitinfocharts.com.
Average fee figures often paint an inaccurate picture of the fees being paid most often on-chain due to high-value outliers. The median transaction fee, which gives a clearer indication of the fees being paid most frequently, also rose during the past week, climbing 91% from $6.66 to $12.74.
Few disagree that in the online world of dollar donations and sub-cent tips, the kind of costs incurred on popular chains such as Ethereum and Bitcoin, where the average fee is currently around $8.50, are not really fit for purpose.
With this in mind, developers have put forward EIP-1559, an Ethereum Improvement Proposal that will overhaul the way fees are calculated on the blockchain. When the upgrade is implemented this coming July, transaction fees will be dynamically adjusted algorithmically. A deflationary aspect will be introduced to Ethereum’s tokenomics at the same time, with a portion of the network fees set to be burned out of existence after each transaction.
In the longer term, Ethereum is scheduled to move to a proof-of-stake consensus algorithm, which will see the current proof-of-work system abandoned completely. In PoS blockchains, coin holders stake coins to secure the network in return for passive income, as opposed to miners contributing computing power in pursuit of block rewards. The new consensus algorithm is being implemented as part of Ethereum’s ongoing upgrade to Eth2.
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Author: Greg Thomson