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Why Ethereum’s transaction fee is changing its future?

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Ethereum is trading above $1600 however its high transaction fee is the downside. The high gas cost on Ethereum is making it clear that the altcoin has raised the barrier with regard to the entry of small investors and beginner traders in retail trading. While it is a popular opinion in the trading community that you don’t need to own one whole Ethereum or Bitcoin to reap the corresponding benefits in your portfolio, it has become challenging for retail traders to own small amounts given the current circumstances.

Owing to the high transaction fees there is close to no economic viability in making transactions on the Ethereum network, for small account holders and this leaves Ethereum as a whales only playground for on-chain transactions. This is in direct contrast with Ethereum’s promise of becoming the future of finance.

When DeFi first became popular gas used to cost a dollar or two, however now, smart contract transactions cost anywhere between $30-$100. The expectation from the “future of finance” was much different and a whale only future would make it hard to differentiate between the present and the future of finance.

Why Ethereum's transaction fees is changing its future

Source: Twitter

There are apps in DeFi that are competing to get users from the ETH network. The top two DeFi projects that are in direct competition with Ethereum are Polkadot and Solana. These two projects plan to migrate to other Layer-1 chains, and that makes it possible for investment to flow out of Ethereum. There are other projects that may consider migrating if network fees continue to increase.

Additionally, if gas fees continue to remain high, decentralized exchanges stand to lose more users, and centralized exchanges with their limitations with regard to security may be the only option for retail traders. Though Layer-2 adoption is underway, traders are left to face the high network fees until then.

Binance Smart Chain has become increasingly popular in the past few months, and this may be partly attributed to high network fees in Ethereum. In addition to DeFi projects that may benefit from investment pouring out of Ethereum, Binance Coin has had a fair share of inflows, and its price rally may be attributed to Ethereum.


Ekta is a full-time journalist at AMBCrypto and her specialization lies in spot markets. Currently pursuing her MBA, she is passionate about trading, fintech, and everything decentralized.
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