The simple analogy to use when explaining the impact of Ethereum’s high gas fees would be this: imagine trying to get an Uber home during a busy weekend from a populous town, the surge pricing and considerable waiting time would put a dent not only in your wallet but arguably your patience as well.
Miners operate within a fixed number of blocks, making it inevitable for them to prioritize certain transactions; as no merit determines priority, money takes the highest priority. The higher a transaction is in demand, the higher the fees a user will pay and the already high prices due to a limited number of blocks.
Thus, Ethereum prices have always been on an upward trajectory due to the increasing number of transactions and limited block size.
Suppose you are wondering why users have to pay gas fees. In that case, gas fees on Ethereum are charged per transaction to cover the energy cost a miner incurs when providing computational power to process a transaction.
Ethereum high gas fees a rule, not the exception
Lately, transactions on Ethereum have proved uneconomical. Traders are raising their concerns on numerous social media platforms such as Twitter, showing their frustrations on the amounts required for basic transactions. Sadly, the situation is not going to change anytime soon. With the growing demand for decentralized services, it is only going to get worse on Ethereum.
Consider this, at the peak of the 2017/18 bull run, gas fees on Ethereum peaked at around $5.70. Since that time, the average daily gas fees have been above $5.70, including the bear market that proceeded the bull run in 2018. The high gas fees in Ethereum are not a new problem but a recurring one that seemingly has no end. Sure, market factors play a role, but it all boils down to the foundations of a platform; without a proper plan to scale up on demand, Ethereum will forever suffer recurring high gas fees.
Unsurprisingly, other platforms are suffering due to the increasing gas fees. Recently, Shield Finance announced delays in their Uniswap listings due to high gas fees, making it virtually impossible to purchase cryptocurrencies economically.
Such high prices compromise the potential success of blockchain. Traders increasingly become skeptical once prices move above profitable levels and choose to delay their transaction plans for later dates, moves that have incalculable consequences to the overall blockchain economy. DeFi farmers also experience the pinch of limited transactions as they end up harvesting significantly lower cryptocurrencies than expected.
Their loss is further exacerbated by the fact that they have to withdraw their principal amounts and earnings, which attracts gas fees and possible withdrawal charges depending on the platforms they were farming. Thus, the entire DeFi ecosystem becomes a series of expensive inconveniences once gas fees surpass a certain threshold.
Luckily, as the high gas fees increasingly become more of a rule than the exception, one platform is shaping up its network to ensure low transaction fees for the benefit of its community and blockchain in its entirety.
To solve this Vegaswap targets Cross-chain: Binance Smart chain, Solana, Polkadot, and Polygon are the target chains which each have significantly lower gas fees. This also means that projects building on these chains have a lot better time with user acquisition and can get a wider distribution of token holders.
Dynamic fees by Vegaswap
Early planning can mitigate the types of prices users are forced to pay for simple transactions. Vegaswap had to observe and learn the market as it worked on its platform, allowing them to plan measures to mitigate extreme increases in gas prices.
Among Vegaswap’s features is a dynamic curve model that determines gas pricing in its ecosystem. Vegaswap is an automated market maker protocol; thus, it needs a system that can accommodate the many transactions it expects and the volatility of some of the tokens it will likely host on its platform.
With the dynamic curve model in place, Vegaswap can comfortably achieve efficient gas prices that reflect the market position without heavily impacting the wallets of their users. Multiple variables across several dimensions, including volatility and volume, are incorporated into the pricing curve, resulting in transaction fees that are significantly cheaper than Ethereum’s average prices.
The pricing also accounts for the type of transaction a user requires and the intended processing time. Factors such as transaction acceleration will also be accounted for in the final gas price and subsequent fee structure.
Another seemingly unrelated factor that may help is the smart pool feature on Vegaswap. With an innovative application of smart pools, users can help reduce gas fees by establishing trading rules geared towards reducing unnecessary trades that congest platforms for no good reason.
Gas fees and Cross Chain In the future
Most blockchain platforms cannot match the growing demand of transaction requests from an increasing market. Adopting newer forms of handling transactions is the only way forward. Blockchain platforms will also need to learn from their progressive peers, such as Vegaswap, to catch up with the ever-changing market demands. Thus, the trend set by Vegaswap should be studied intricately by other platforms to see whether it is adaptable or whether they may have to leave the entire DeFi and DEX market to Vegaswap.
Vegaswap is a user-centered automatic market maker that leverages multichain technology, providing users with a wide range of DeFi and cross-chain applications through its platform. It supports and enables seamless token earnings through customizable liquidity pools, dynamic pricing, and an intuitive UI.
Vegaswap makes the work of LP providers efficient and profitable by creating provisions for unique smart pools, providing analytics tools, and reducing impermanent loss with adaptive spread.
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