Assets, Ethereum

Why Ethereum Gas Fees Is So High?

As the second-largest cryptocurrency by market capitalization, Ethereum has seen a lot of growth in 2020. The price of ETH has more than tripled since the beginning of the year, and the network is being used more and more for decentralized applications (dApps) and smart contracts.

However, as Ethereum usage has increased, so have gas fees. For those unfamiliar, gas fees are the amount of ETH that users must pay to have their transaction processed by the network.

And right now, gas fees are very high.

So why are Ethereum gas fees so high? Let’s take a look at some of the reasons.

1. Increased usage of the Ethereum network

As mentioned, one of the main reasons for high gas fees is increased usage of the Ethereum network. More transactions means more demand for space on the blockchain, which in turn drives up prices.

2. Congestion on the network

Another reason for high gas fees is congestion on the network. When there are a lot of transactions trying to be processed at once, it can cause delays and backlogs.

NOTE: WARNING: Ethereum gas fees have been incredibly high recently. This is due to the increased demand for transactions on the Ethereum blockchain. It is important to be aware of this when considering sending a transaction on the Ethereum blockchain, as the fees associated with it can add up quickly and be much higher than expected. Make sure that you take this into account when planning and executing your transactions.

This can lead to higher gas prices as users are willing to pay more to have their transaction processed quickly.

3. The way gas fees are calculated

Another factor that contributes to high gas fees is the way they are calculated. Gas prices are based on two things: the amount of computational power required to process a transaction (called “gas”), and the amount of ETH users are willing to pay per unit of gas (called “gas price”).

So when demand for processing power goes up, so does the gas price. And right now, demand is very high.

4. The current state of ETH mining

Finally, another reason for high gas prices is the current state of ETH mining. Ethereum miners are rewarded with both ETH and gas fees for processing transactions.

So when ETH prices are high, miners have an incentive to process more transactions and charge higher fees. This can lead to a feedback loop where higher fees lead to even higher profits for miners, which then leads to even higher fees.

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