Ethereum transaction fees continue to rise, pass bitcoin fees
What's the end game for Ethereum's gas price crunch?
Ethereum is continuing to feel the crunch of transaction fees.
Like most things in cryptocurrency, the exact measurements are largely extrapolation, calculated in various ways like total fees paid divided by number of transactions in a time period, and you'll find varying results depending on where you get the information, and how it's displayed (average fees, median fees, measures in gas or in US dollar equivalent, etc).
But in all cases, it's clear that Ethereum hit a crunch at the start of July, and that its fees are rising. The fees for those who want fast transactions or frequently need to use gas-intensive contracts are especially high.
By one measure, Ethereum's average transaction fees passed bitcoin's for the first time ever today.
Why are fees suddenly so high?
The main reason fees are so high is because of deliberate network spam designed to drive up fees at enormous (to most) cost to the spammer. So someone's poured a reasonable amount of effort and about US$15 million equivalent into raising transaction fees on the Ethereum network.
Vitalik Buterin's response probably sums up the general sentiment.
Ethereum is free for anyone to use as they want, and if they do something unintended or detrimental to the network, then it's Ethereum's fault for allowing it to be possible.
One of the reasons transaction fees exist in the first place is to prevent these kinds of spam attacks by rendering them incredibly expensive. It accomplished the incredibly expensive part, but that doesn't seem to have been an effective deterrent.
In the grand scheme of things though, $15 million a week is a very feasible amount of money. Consider that next to the approximately $1.5 billion per month Berkshire Hathaway earns by sitting on equity, the amount spent by some of the world's larger governments or the billions that tech companies make and spend. Facebook could have spammed Ethereum for decades with the amount spent on acquiring WhatsApp.
If Ethereum's functionality can be seriously impacted by only $15 million a week, it might not be as bulletproof as a decentralised immutable world computer needs to be.
How do the spam attacks work?
Functionally, it's just like clogging up a pipe by stuffing it with money. It's expensive, but effective.
This is currently being done by repeatedly circulating worthless tokens between hundreds of different shell accounts and paying the transaction fees for each, which accounts for the cost of the attack.
What can be done about it?
There probably isn't really anything to be done except wait until one of the following happens:
- The spammer runs out of money or can't continue to justify the cost of spending millions for kicks. This might be most likely to happen soonest. But at the same time, the spammers are clearly ready to commit a sizable amount of funds, assuming they're not just doing it for fun. $15 million a week will get you a solid year of spamming for the bargain price of $780 million, so it's not beyond the realms of possibility that a rival project like EOS, which pulled in $4 billion in its ICO and is now going back for more would earmark a billion or more for taking down the competition.
- Ethereum introduces updates like Sharding which greatly improve network scalability. This is essentially like making the pipe much wider, so it takes a lot more money to clog up the pipe in a noticeable way. There's no hard timeline for these updates, but sometime in 2019 might be a reasonable guess for some of the main ones.
- After months of spam with no end in sight, the high costs are seen as the new normal. The spammers muddy the waters by getting people to argue that there isn't actually any spam and it's just Ethereum having bad pipes. Either way, the high costs are impossible to ignore and Ethereum implodes as people just stop using it, developers quit the platform, businesses scratch it off their list and it starts stagnating. At the same time, the spammers use their giant wallets to suppress Ethereum prices and drive away speculators. By the time Ethereum releases its updates, people have already committed to building on alternative platforms, and it never regains its momentum.
- Something else entirely or a combination of the above.
It might be time to start an Augur betting pool on which one will happen first. Just be prepared for the gas costs.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and XRB.
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