Ethereum may not have too long to get its high gas fee issue in check, according to JPMorgan
Ethereum’s gas fees can move from a few dollars to a few hundreds in a matter of seconds.
- According to an analyst at
JPMorgan, Ethereum might be losing out to competitors like Cardanoand Solanaalready.
- Ethereum’s valuation has dropped by $200 billion in less than six months.
AdvertisementEthereum’s high gas fee has been a concern for many, and is a key hurdle in the platform’s scaling ability. Now, investment bank JPMorgan has said that the platform is losing ground to rivals like Solana in the non-fungible token (NFT) sector due to these high gas fees.
Gas fees is the fee paid to miners for validating a transaction on the Ethereum network. It is known to be as volatile as the price of Ether itself, and can add hundreds of dollars to the cost of a transaction. At the time of writing, the gas fee was averaging at around $6, but the value has been known to jump to over $150 quite often since it depends on the traffic on the network.
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Panigirtzoglou isn’t the only one who feels this way either. To be sure, Ethereum’s market capitalization has dropped from a massive $568 billion in August 2021 to around $373 billion today, according to data from Coinmarketcap.
NFT market scaling fast
On the other hand, the market for
For instance, NFT marketplace OpenSea was valued at a massive $13 billion earlier this month, when the company raised $300 million. At the time, the company said that trades on the platform grew by 600 times over 2021. NFT projects like Bored Ape Yacht Club (BAYC) and Cryptopunks are other examples of billion dollar NFT projects and how fast the industry has been growing.
This is where the scaling problem comes in, since many or even most NFT projects are built on the Ethereum network and its smart contracts feature. And with more NFT transactions, the load on the Ethereum network keeps growing too.
Solving the problem
To be fair, Ethereum’s developers are well aware of the problem too. In August 2021, right around the time when Ethereum had hit its $500-plus billion market cap, the platform saw an an update called the London Hard Fork, which was the first big step towards moving to the second generation of the network — Ethereum 2.0.
With the London Hard Fork, the platform introduced the ‘proof-of-stake’ system, which is meant to reduce the overall gas fees and its volatile nature. The problem is that Ethereum 2.0 will still take at least a few months to kick in and no concrete date has been set just yet. With Cardano and Solana already based on the same proof-of-stake system, experts like JPMorgan are concerned that developers will migrate to these competing platforms rather than depending on Ethereum for too long.
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