If you have sent Ethereum lately, you know that the cryptocurrency is currently experiencing all-time high fees and congestion on the network. As a cryptocurrency that is supposed to be known for providing fast, affordable transactions, this has proven problematic for not only frequent users of the currency, but also prospective investors. As of September 10, the average ETH fee has risen to $4.55, which is an astonishing 70% jump from just 48 hours prior to that date.
In addition to reaching an all-time high, ETH fees have been on a steady and sustainable rise for months, averaging above $2 for a record-breaking period of time. Ethereum transaction prices have begun to settle, but are nowhere near back to normal following a recent price crash in the cryptocurrency markets.
Transaction price increases might be scary for the prospective buyer, but actually tell a deeper story–one that isn’t all that negative.
What do Higher Fees Actually Mean?
Yes, there is no denying that fees are on the increase and it is more expensive than ever to send a transaction on the Ethereum blockchain. But what does that actually mean? For those that are bullish on the long-term prospects of Ethereum and the involved projects, it actually could be looked at as a very positive sign.
Basically, higher fees mean that there is more demand for priority on the network. Transaction fees work on a sort of bidding system, with higher bids being verified first in line. Higher than ever fees generally means that there is higher than ever activity on the network. This means that more and more people are using Ethereum and the projects built on Ethereum’s foundation. This is a great thing for Ethereum and all the projects built upon its framework.
DeFi Leading the Charge
One of the main reasons for this drastic change in volume and demand has been the craze associated with DeFi projects, standing for decentralized finance. These projects have been highly popular among new investors and many see a lot of potential in DeFi projects. Many of these projects are built upon Ethereum’s network and that is what is causing much of the congestion in the network.
As DeFi falls out of favor, or at least slows down, the network should return to normal and you should be able to proceed sending affordable, fast, secure transactions on the Ethereum blockchain.
Consequences of Network Congestion
One very concerning aspect of all of this is, of course, that cryptocurrency in general will become less popular because of the congestion and high fees. That is a very real possibility. People come to cryptocurrency in order to have access to secure, fast, and affordable transactions. When two of the three of those are non-existent, even for a short time, people will begin to question the value proposition of the asset. However, as long as there is money to be made in trading cryptocurrencies, you can rest assured that there will be demand for owning, sending, and receiving cryptos.
