- ETH has recently rallied past $1,000 for the first time since February 2018
- The massive spike in demand has resulted in much higher transaction fees on the Ethereum network
- While Ethereum 2.0 is being rolled out, Layer 2 solutions are seeking to alleviate Ethereum’s scalability woes
Ethereum network fees skyrocket as ETH soars past $1,000
Ethereum has been the star of the show in the cryptocurrency market these past few days – even though Bitcoin has increased past $30,000 for the first time in its history, Ethereum has displayed an even more impressive rally, surpassing the $1,000 mark for the first time since February 2018.
After a retracement that followed a brief peak at around $1,150, ETH is now posting an extremely impressive 40% 7-day change, compared to BTC’s 16% gains in the same time period.
However, the large demand that has followed ETH’s increase in price has also resulted in some unfortunate side effects for those that actually use the Ethereum network regularly. Transaction costs have skyrocketed, leading to many complaints in the cryptocurrency community that Ethereum-based apps are currently »unusable« due to the high transaction costs.
According to cryptocurrency analytics company Glassnode, Ethereum miners collected a record-breaking amount of fees in terms of USD in a 24-hour span:
#Ethereum fees in the past hour (24h MA): $898,000 USD – All Time High.
Chart ? https://t.co/CDX7ubaw8E pic.twitter.com/g61U7phCAI— glassnode (@glassnode) January 4, 2021
It has been clear for a while now that the usability of the Ethereum network takes a big hit when demand is soaring – this is one of the main reasons why the Ethereum project is currently transitioning to Ethereum 2.0, which will hopefully alleviate most of these issues. Ethereum 2.0 will replace proof-of-work with proof-of-stake, which should result in much faster ands cheaper transactions for end users.
However, it could take several years before Ethereum 2.0 offers fully-featured smart contract functionality, like the Ethereum »1.0« network does today. Currently, the transition to Ethereum 2.0 is still in »Phase 0«, and the new network is limited to staking functionality only. In the meantime, many Ethereum community members are banking on layer 2 solutions that take some of the heavy load off the main Ethereum blockchain.
One of the most hotly-anticipated layer 2 scaling solution for Ethereum is Optimism, which takes advantage of »optimistic rollups«. According to the Optimism team, the plan is to release the preliminary mainnet on January 15. The DeFi protocol Synthetix will be the first project to trial Optimism on mainnet.
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