Ethereum Network Gasps For Air: NFT And Memecoin Boom Sends Gas Prices Through The Roof

The Ethereum ETH/USD network has recently been confronted with a worrying issue for its users – the escalating gas consumption rates on the platform.

Gas fees, which are levied for processing transactions on the Ethereum blockchain, have been increasing at an unsettling pace. Data scientist Hildobby shared information from Dune, revealing that the median ETH gas price, measured in gwei and averaged over a week, reached 87.

This peak hasn’t been seen in the past year – since May 2022.

The average transaction fee is now around $50, a marked rise from just a few months ago, when it was below $10.

High gas fees have led to user dissatisfaction, as even straightforward transactions have become progressively more expensive.

Many users, such as dApp developers, traders, and retail investors, are finding it challenging to engage with the Ethereum ecosystem due to exorbitant gas fees.

The primary cause of this issue is the surging demand for transaction processing on the network, driven by the re-emergence of memecoins in the market after nearly two years of silence.

In recent weeks, memecoin trading has accelerated, with the majority of activity taking place on the Ethereum blockchain. PEPE, a memecoin whose market cap topped $1 billion in the two weeks following its mid-April launch, serves as an example.

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Other memecoins that have experienced substantial hype include ArbDogeAI (AIDOGE), WOJAK WOJAK/USD, and AiShiba SHIBAI/USD.

Another contributing factor to elevated ETH gas fees is the resurgence of NFT trading on the Ethereum blockchain. While trading volumes fell significantly in April, reports indicate they reached $4.7 billion in Q1 2023, a 137% increase from the previous year.

Glassnode, a blockchain intelligence platform, disclosed that gas consumption for NFT-related activities on Ethereum rose by 94% between January and February.

The Ethereum community is diligently working on solutions to alleviate this problem, such as the introduction of the Ethereum Improvement Proposal (EIP) 4844.

The proposal aims to decrease gas fees and transaction throughput by incorporating a new transaction type that accepts “blobs” of data.

In the interim, users have had to adapt their strategies.

Some have chosen to execute transactions during off-peak hours when gas fees are usually lower, while others have migrated to alternative blockchain networks with lower fees or adopted layer 2 scaling solutions like Polygon MATIC/USD to cut transaction costs.

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