- A new report reveals that an upcoming upgrade may not lower gas prices.
- Ethereum continues to be attractive to institutions nonetheless, but gas prices are an inhibitor.
Ethereum was in a struggle to break out of the $1,700 territory today, trading at $1,713 at the time of writing. At that point, ETH prices were down by 0.8% compared to the previous 24 hours, but better than the lowest price of $1,650 recorded in the same period.
High gas charges an impediment
Ethereum’s struggles with high gas prices could be far from being resolved if a recent report by Coin Metrics is anything to go by. The report claims that the cryptocurrency has consistently charged high gas prices, thanks to the major gains it has made in 2021. As a result, the median gas charge for mining Ethereum currently stands at $10.
The report further claims that the much-anticipated launch of ETH 2.0 may not achieve much in reducing gas charges, as long as ETH continues to rise in value. For context, Ethereum gas fees were an average of $5.7 during the market bull run of 2017/2018.
It has also emerged that the consistent rise in ETH prices has led to users increasing their tips to miners. This has led miners to prioritize requests from users giving bigger tips.
The rising popularity of DeFi has exacerbated congestion within the Ethereum network. The Coinmetrics report reveals that the Ethereum block has been operating at 95% of its capacity since last summer. However, this has grown to between 97%-98% in March 2021.
If this is not resolved soon, there’s a risk that the Ethereum network could be stretched to full capacity. This may adversely affect ETH price. The scarcity in block capacity has been a major contributing factor to the escalation of gas prices.
To address concerns over high gas charges, Hermez Network has rolled out its mainnet. The Zero-Knowledge (Z-K) roll-up is designed to lower Ethereum gas charges by consolidating multiple transactions into one.
Ethereum users are likely to shift to Hermez Network following the announcement made on Wednesday. This means that the network is now open for users, who can benefit from the rollup’s much lower transaction costs than Ethereum.
Z-K knowledge rollup verifies transactions in large batches, which are verified by outside ecosystems before being posted on the Ethereum network. This enhances efficiency by saving on block space by up to ten times because Hermez transactions are lighter and are typically 10 bytes as compared to Ether’s 100 bytes per transfer.
Making new inroads
In another development, Uniswap Labs has revealed plans to launch its upcoming Uniswap Protocol v3 on the Ethereum mainnet. The launch is scheduled for 5th May, 2021, and is geared towards improving its capital efficiency and enhancing the quality of execution of its trades. In essence, the move will improve Uniswap’s performance in DeFi and decentralized exchanges by improving liquidity.
Elsewhere, the recent maneuvers by the retail sector have attracted attention from a crypto mining pool in China. Poolin has injected $30 million investment in an Ethereum focused hash rate project.
The move is meant to make it easier for retail investors to participate in crypto-mining. The sector has recently been left behind in the high-stakes mining industry as a result of costly infrastructure and a shortage of chips in the global market. This shows that institutional investment in ETH will likely continue to soar, thereby driving prices higher.
ETH will find support at $1,654. The market is currently bullish and could push the price to the first resistance level at $1,800. A further rally by the bulls could push the price to the second resistance level at $1,845.