Traders are currently extremely concerned about the Ethereum (ETH) blockchain network as it looks that the phenomenon of increasing petrol costs is returning. According to a shared insight from cryptocurrency analytics service provider WhaleAlert, one trader paid fees for a single transaction of up to 64 ETH, which at the time of writing is equivalent to $118,600.
On the Ethereum network, the high gas fee is nothing new, but it has been much less frequent since the network switched from the proof-of-work (PoW) protocol to the proof-of-stake (PoS) protocol through The Merge. Although it wasn’t a direct benefit, the high petrol charge was one of the main factors in switching the protocol to PoS. The justification is that using a different transaction validation mechanism can effectively decongest the network.
The reverse seems to be true given the high petrol prices now being observed. The big meme currency buzz that sparked high network activity and caused a blockage over the weekend may be the root of the problem.
When the Binance exchange launched the PEPE coins and the Floki Inu for trading on its platform, network activity peaked. The profits made by these meme coins, particularly for regular traders, may be reduced by the congestion, which is caused in part by panic selling by whales and the attendant skyrocketing prices.
Place of Layer 2 solutions
The growing cost of petrol costs on Ethereum helped give rise to ground-breaking Layer 2 protocols as Polygon zkEVM, Arbitrum, and Optimism. Users continue to avoid these L2s in order to conduct transactions on Ethereum, despite the fact that the transaction fees on these protocols are far lower than those on the main Ethereum chain.
The reason for this is unclear, but it is often fairly challenging for L2s to fulfil their intended functions of reducing gas costs and promoting scalability when new or community-focused protocols are being built on Ethereum mainnet.
