Ethereum 2.0 will hopefully arrive at the right time to help the network cope with the booming DeFi sector and the growing number of stablecoin transfers
The Ethereum network is experiencing its highest fees in years. This is in part due to the popularity of the network and how much traffic it now receives. However, with this ever-increasing popularity, the Ethereum network is starting to show its age.
Interestingly, although gas usage recorded an all-time high back in May, the number of transactions did not set a new record. It can be determined then that gas is being used in different ways now, such as the proliferation of smart contracts.
Stablecoins and DeFi
Stablecoins are growing in popularity, with 40% of the Ethereum network’s wallets now holding them. USDT and DAI run on the network, which results in an immense amount of traffic — which in turn drives up the fees.
The new DeFi boom is also a significant factor. DeFis reliance on smart contracts is also adding to the amount of gas being used on a daily basis, as previously mentioned. Just yesterday, in its first day of trading, Balance, a DeFi token, increased its price by over 200%. This draws parallels to the stark price rises of Compound’s COMP token since its inception. It appears it could be becoming something of a trend for new DeFi tokens, such as the “altseasons” seen in previous crypto booms.
As Defi’s popularity increases, so too will the number of complicated smart contracts running on the network, as well as the number of users looking to use them.
Ethereum 2.0 cannot come soon enough
As of yesterday a post on the Ethereum blog reassured users that the team were still hard at work on the new update. The update promises much needed scaling capabilities in the form of sharding and aims to increase the speed of the network extensively.
The problem remains that all the update can do at the moment is ‘promise’. It is impossible to know how effective the update will be, and indeed when it will reach that efficiency. Its roll out date is yet to be announced; after which it will likely take at least a year to fully implement. All the while, the stablecoin and DeFi markets — true testaments to ETH’s success — will continue to grow and put strain on the network.