The growing popularity of decentralized finance protocols (DeFi) at Bitcoin Rejoin is contributing to the exponential increase in fees: only yesterday, fees of $6.87 million were processed, a record.
Kain Warwick, founder and CEO of Synthetix (SNX), said in an interview with Cointelegraph, how such high fees are holding back DeFi’s growth:
„In three months, DeFi went from being expensive and a little slow to being inaccessible to many people because of the cost.
In the last 24 hours, Ethereum’s rates have increased 100%, surpassing the previous record of $3.27 for a one-time fee.
MyEtherWallet is the latest to enter the DeFi space by integrating with Aave and Ren
Currently, the average Ethereum commission is higher than the daily wage in many countries around the world. In addition, the additional expenses required to connect a smart contract to a DeFi protocol have led some users to face fees of $100.
A major obstacle to growth
The race against time to save the YAM protocol led many SNX stakers to record $99 fees when collecting weekly rewards. On Reddit, user Willy 3380 wrote:
„A $99 fee is far beyond the ridiculous threshold. This will be a major obstacle to the growth of the system if something is not done to resolve the situation.
ETH’s transaction fees reach an all-time high for the second day in a row
To try and mitigate these exorbitant costs, Warwick said Synthetix will be launching a layer two solution for network scalability sooner than expected: Optimism Virtual Machine (OVM). Already tested at testnet earlier this year, the L2 solution also allows for a couple of thousand transactions per second, instead of the current handful of TPS:
„We are focusing on MVO and I honestly believe we will launch it before the 3-6 months we had planned. I think it will require a faster transition than planned, which is probably one of the three most important things we need to do.
The solution should work with any smart contract at Ethereum.
Ethereum’s network hash rate reaches its highest level in 20 months with the rise of DeFi tokens
A chance to unseat Ethereum
Due to delays in the release of Ethereum 2.0, layer two protocols are becoming increasingly important to solve network congestion problems. Qiao Wang, Messari’s product manager, clarified that Ethereum could face stiff competition against more scalable blockchain platforms:
„I changed my mind after using a dozen DeFi platforms. Until ETH 2.0 is released, a highly scalable blockchain platform could undermine Ethereum. Paying a $10 transaction fee and waiting 15 seconds for the payment to complete is a very bad user experience“.