Since at least 2014, high transaction fees have been a constant thorn in investors’ side and blockchain projects’ faces. Vitalik Buterin, co-creator of Ethereum Network, stated that “The Internet of Money” should not cost $0.05 per transfer. It’s absurd.
Now, fast forward to November 2021. The simple act of appraising a token so it can be transacted via Uniswap could cost up to $50 in Ether (ETH), depending on the hour.
Average cost of Ethereum gas. Source: Etherscan
Layer-2 solutions, which were supposed to solve the fee problem, have not been able to escape the high fees of congestion networks. As new users join the cryptocurrency ecosystem every day, layer-2 solutions are no longer available.
isnt arbitrum supposed to be cheap lol what a joke pic.twitter.com/v839tZ4nch
— satsdart, (@satsdart), November 2, 2021
Users move to networks that charge low fees
Due to persistently high Ethereum fees a growing number users are bridging assets with lower-cost Ethereum Virtual Machines (EVM) compatible networks. Dune Analytics data shows that bridge protocols have a rising value since October’s beginning.
Total value of Ethereum bridges. Source: Dune Analytics
The chart above shows that the Ronin bridge is one of the most popular protocols in the last month, largely due to Axie Infinity users migrating their assets to the cheaper platform.
This chart, which shows protocol revenue from Token Terminal, illustrates the popularity of Axie Infinity.
Top projects based on cumulative protocol revenue over the last 7 days. Source: Token Terminal
Related: How to maximize the DeFi benefits and increase your high-interest savings
PancakeSwap is the third-ranked protocol in terms of revenue. It’s a high TVL DeFi protocol that runs on the Binance Smart Chain and offers lower transaction fees than Ethereum.
The majority of top gainers in terms TVL in the last week were also protocols that can be found on Ethereum competitors, or provide multi-chain functionality in sidechain environments.
Trending projects in TVL over the past 7 days. Source: Token Terminal
Avalanche.money, YieldYak, SpookySwap, SpookySwap, Yield Yak and Loopring are all multi-chain or Ethereum sidechain compatible networks that have experienced a significant increase in TVL over the past 7 days.
Unless there is immediate action to address the high transaction costs on Ethereum, it is likely that liquidity will continue to be migrated to other blockchains.
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