Ethereum was a standout star in the crypto market in 2020. Despite the recent breakdown of over 15%, the highest-ranked altcoin has risen over 200% and 350% from its lowest point on Black Thursday.
However, since then, Ethereum has apparently taken on a whole new life, powered by DeFi and escalated by the surge in Uniswap tokens. But all of this usage has clogged the Ethereum blockchain, causing fees for daily transactions to reach unrealistic levels. It has prompted some investors to avoid transactions at ETH at all, which could create a “gloomy” future for the cryptocurrency, which is focused on smart contracts.
Ethereum fees are reaching astronomical levels, discouraging the use of cryptocurrency
The decentralized financial boom has brought crypto back into the spotlight and possibly created a bull market.
Each week that went by, a new DeFi token soared, fueling the sudden surge in interest in the seemingly unstoppable trend. The DeFi market may have reached its boiling point after the ERC-20 token exchange service Uniswap began listing a deluge of food tokens.
These fresh out of the oven DeFi tokens were bred by Ethereum holders, but tokens like hot dog and pizza were sold to near zero.
The huge appetite of the market for this type of DeFi token has caused Ethereum fees to hit crippling numbers.
Related reading | Pizza & Hot Dogs: How Uniswap’s Profit Buffet Can Burn Crypto Investors
Demand for Ethereum only grew when these investors were forced to pay high gas prices if they wanted to participate in the hottest new token. Unfortunately, many were badly burned in the process – both due to falling asset prices and astronomical ETH fees.
The high fees have drawn several members of the crypto community with a variety of credentials to speak out. One such person, Simon Dedic from Blockfyre, warns that the future of Ethereum could be “bleak” if ETH 2.0 doesn’t fix outrageous gas prices.
I spent about $ 800 in transaction fees on some trades today.
Also, I lost around $ 10,000 today trying to sell because a tx with a lower nonce failed to get through for 3 hours. $ ETH 2.0 has to come as soon as possible, otherwise I see its future bleak.
– Simon Dedic (@scoinaldo) September 2, 2020
Why the DeFi craze can bring a blustery, bleak future for the top altcoin
Dedic is not alone. Several pseudonymous traders expressed dislike for the situation, saying that they avoided transactions because the Ethereum fees are currently so high. Even Binance is joking about the subject on social media.
Although Ethereum has had a strong 2020 thanks to soaking up the DeFi spotlight, the Altcoin could get dark extremely quickly.
The recent sell-off in the crypto market has crushed almost all of the recently minted DeFi tokens and set Ethereum back nearly $ 100. And things are only just beginning. With a high risk presidential election coming up in the US, investor risks versus the dollar are decreasing.
ETHUSD Daily Potential Downside Targets | Source: TradingView
To make matters worse, the losses on these DeFi tokens only get worse as they have to be exchanged back into Ethereum before they are paid out directly. Because the fees are so high, investors can be encouraged to stay in positions, leading to heavy losses as these new tokens run nowhere.
It’s the risk these crypto insiders apparently took but were either blinded by greed or just didn’t care.
Related reading | This signal says Ethereum could lead alts off a cliff
Ethereum developers need to find and implement scaling solutions quickly, otherwise the future of the altcoin could be jeopardized. Many platforms have been staged as Etehreum killers, but in the end it could end up being suicide due to high fees during peak usage.
$ 15 fee for $ 50 USDT payment
The future of money
Wonder when this uniswap shit will end😑 pic.twitter.com/x61j9c7BVD
– Feras_Y (@ FeraSY1) September 3, 2020
It’s gotten so bad that dollar-pegged stablecoins built on the Ethereum blockchain can cost almost $ 15 just to send $ 50 in USDC or Tether. The fees alone destroy the use case of other assets built on Ethereum. And this could lead to an extremely bleak future for Ethereum.