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Ethereum and Bitcoin transaction fees surge, triggering scalability debates

EditorAmbhini Aishwarya
Published 10/11/2023, 06:28 pm
Updated 10/11/2023, 06:28 pm
© Reuters

A substantial surge in transaction fees on Ethereum and Bitcoin networks has reignited discussions about blockchain scalability, according to data from BitInfoCharts on November 10, 2023. The high-priority transactions on Ethereum saw gas fees rise to a record $220, while similar Bitcoin transactions reported $10 fees—a significant increase from the average fee of $1 over the preceding three months.

The surge in fees has led users to migrate their assets to cheaper networks such as BNB Chain, and proponents of alternative blockchains like Solana and PulseChain have highlighted their lower transaction costs. Solana reportedly charges a total of $55-60 per minute for all users, compared to Ethereum's high individual transaction fees.

Concerns have also been raised about the impact of these high fees on the unbanked and lower-income populations. A test transaction on Uniswap, a decentralized exchange, via an Ethereum hot wallet required a network cost of $45.65 for a $300 transfer, raising questions about its accessibility for these groups.

Before this surge, the average transaction cost on Ethereum was around $11.35. The gas fees had previously peaked at $196 on May 1, 2022, and remained consistently above $20 from August 2021 through February 2022.

To tackle scalability issues, developers on Bitcoin and Ethereum have prioritized decentralization and security at the base layer, offloading much of the execution environment to layer 2 solutions like Lightning Network for Bitcoin and Arbitrum, Optimism, and Polygon for Ethereum. Critics argue for monolithic blockchain architectures where everything is handled on the base layer.

The primary causes for this fee escalation are market demand and network congestion. As the debate continues, it remains to be seen how blockchain networks will address these challenges to ensure accessibility and affordability for all users.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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