The price with ETH has ripped through it’s all-time high. However, the crises around Ethereum gas fees has yet to be solved. And today, gas fees are the highest that they’ve been in a long time if ever.
An unfair position for beginners
One simple trade of less than $1000 has a gas fee of nearly $200. That’s 20% of the entire trade. For traders with small capital this can cost them a lot of opportunity. Say, someone has only $2000 in crypto. Are they going to want to make a transaction which charges them a fee that is 10% of their entire portfolio? I would hope not.
This creates an environment that only people with large amounts of capital can afford to do any trading at all.
Why Ethereum 2.0 will lower gas fees
Ethereum 2.0 is set to be released later this year. This will change Ethereum from a proof of work network to a proof of stake network. In POW networks, miners are paid gas fees for running transactions which cost a high amount of electricity and require very expensive equipment. In a proof of stake network, instead of a few concentrated individuals working as validators, anyone who holds Ethereum can become a validator. So, with Ethereum 2.0, there will be thousands if not millions of people in time who will be running their own nodes.
How Ethereum 2.0 will cause price to explode
We will over time see an increase in the price of Ethereum as more people come to use the network. Ethereum 2.0 will cause more scalability through lower transaction fees, bringing in more people instead of deterring them from fees that for some make it impossible to trade.
If Ethereum price can soar to above $4,000 considering how awful the user experience can be, imagine how high the price could become once Ethereum 2.0 is released.
Additionally, as seen in the tweet above, Ethereum 2.0 will cause validators to hold their Ethereum instead of dumping it through staking incentives. Without major holders dumping their Ethereum, the value of the network will also continue to increase.
When will Ethereum 2.0 be released?
This is actually a question with more than one answer. This is because Ethereum 2.0 is a release of several different upgrades with their own release. The Beacon Chain is one Eth 2.0 upgrade that already went live December 2020. And according to Ethereum.org these other updates will come later in 2021 and 2022. An excerpt of information from Ethereum.org reads,
The merge is when mainnet begins using the Beacon Chain for consensus, and proof-of-work is turned off. What’s mainnet? Shard chains should follow the merge, some time in 2022.
While gas fees are higher than ever before, it’s good to see that the price of Ethereum is still doing well. If it can do this under these circumstances, it’s speaks volumes of how Ethereum will continue to grow and be valued as one of the top networks in all of crypto.
Find more information on the Ethereum price predictions in following article: Ethereum Will Explode Says Lark Davis – Bigger Than Bitcoin?
Aaron is passionate about blockchain and has been an investor in cryptocurrencies for the past years. He enjoys engaging with other people in the cryptocurrency community online, particularly on Telegram, and learning from experts.