Blockchain technology has transformed the way we transact and exchange value in the digital age. However, the rise of gas fees has presented a significant challenge to the usability and adoption of blockchain applications.
Gas fees are the transaction fees paid by users to execute transactions on a blockchain network. The fees are paid in cryptocurrency and vary depending on the network’s congestion and the complexity of the transaction.
In this blog, we will explore the impact of high gas fees on blockchain adoption, analyze the effect of high gas fees on user experience and transaction volume on different blockchain platforms, discuss possible solutions to reduce the impact of high gas fees and provide real-world examples of blockchain applications that have been affected by high gas fees.
The impact of high gas fees on blockchain adoption
High gas fees can discourage users from using blockchain applications due to the high cost of executing transactions. Users may find it expensive to interact with blockchain applications, and this can hinder the adoption of blockchain technology.
High gas fees can also lead to low transaction volumes on blockchain platforms, making it difficult for developers to justify the cost of building decentralized applications (dApps) on the blockchain.
The effects on user experience and transaction volume
The impact of high gas fees on user experience and transaction volume on different blockchain platforms can vary. For instance, Ethereum, which is the second-largest blockchain platform by market capitalization, has been grappling with high gas fees for some time.
The platform’s popularity has attracted a large number of users, leading to network congestion and high gas fees. This has resulted in slow transaction processing times, with users waiting for hours or even days for transactions to be processed.
Other blockchain platforms such as Polygon have emerged as alternatives to Ethereum, offering faster and cheaper transactions. Polygon, formerly known as Matic Network, is a Layer 2 scaling solution built on top of Ethereum.
It allows for faster and cheaper transactions by using a Proof of Stake (PoS) consensus algorithm, unlike Ethereum, which has used Proof of Work (PoW) due to which there is difficulty in scalability. The platform also has a gas tracker that helps users monitor gas prices and choose the most cost-effective options.
To mitigate the impact of high gas fees on blockchain adoption, various solutions have been proposed.
One such solution is the implementation of Layer 2 scaling solutions. These solutions aim to increase transaction throughput while reducing gas fees. They include sidechains, state channels, optimistic roll-ups and zero knowledge roll-ups.
Another possible solution is the implementation of sharding. Sharding involves dividing a blockchain network into smaller partitions, allowing for parallel transaction processing. This can increase transaction throughput and reduce gas fees.
Lastly, crypto gas trackers are essential tools for monitoring gas fees on blockchain networks. They help users make informed decisions when doing transactions by providing real-time gas price updates. Knowing when the gas fee is low through a tool can be helpful for blockchain developers, especially, before they execute transactions.
One such gas tracker is the Metaschool Gas Tracker, which is designed to help users monitor gas prices on the Ethereum network, which is notorious for high gas fees. It’s a reliable and user-friendly tool that allows users to view gas prices in Gwei and ETH, as well as track historical gas prices.
DApps affected by high gas fees
One example that comes to mind instantly is CryptoKitties, an NFT game on the Ethereum network that allows users to breed and trade digital cats. The game became popular in 2017, leading to a surge in demand for the Ethereum network.
However, the congestion caused by the demand resulted in high gas fees, with some transactions costing as much as $100. This led to a decline in the game’s popularity, with users finding it expensive to interact with the game.
Another such example is Uniswap, a decentralized exchange built on Ethereum. Uniswap allows users to swap ERC-20 tokens without the need for an intermediary.
But, as of late, the exchange has been grappling with high gas fees, with users several hundred dollars to execute transactions.
This has led to the emergence of applications built on other blockchain platforms such as Binance Smart Chain and Polygon.
High gas fees remain a significant challenge to the usability and adoption of blockchain applications. Users may find it expensive to interact with blockchain applications, leading to low transaction volumes and hindering the growth of the blockchain industry.
However, solutions such as Layer 2 scaling, sharding, gas tracking, and the emergence of alternative blockchain platforms such as Polygon offer hope in reducing the impact of high gas fees. As the blockchain industry continues to evolve, it is essential for developers to consider the impact of gas fees on the usability and adoption of blockchain applications.
By implementing scalable and cost-effective solutions, we can ensure that the blockchain industry continues to grow and evolve while offering users an affordable and seamless experience.