Ethereum has been a star in the cryptocurrency world, but recently it has been shrouded in the shadow of high transaction costs. As the Ethereum network is congested and transaction fees soar, people can't help but wonder whether Ethereum will become a fee-based market? Let's take a deeper look at this issue.

The transaction costs of the Ethereum network have always been a focus of attention. With the rise of DeFi (decentralized finance) applications, the number of users has surged, resulting in serious network congestion, longer transaction confirmation times, and higher transaction fees. In this case, the future trend of Ethereum is questionable.

High transaction costs caused by network congestion

As one of the most dynamic and innovative blockchains, Ethereum faces tremendous pressure from both inside and outside. As more users and developers join the Ethereum network, the number of transactions has surged, leading to network congestion. In this case, miners tend to choose transactions with higher transaction fees for packaging, while low-fee transactions may be delayed or even fail. This phenomenon exacerbates the rise in transaction costs, making ordinary users and small traders miserable.

Prospects of Ethereum's fee market

With transaction costs remaining high, will Ethereum transform into a fee-based market? Some observers believe that Ethereum may be moving in this direction. In a fee-based market, high-value transactions will be prioritized, while low-value transactions may need to pay higher fees to be confirmed. This mechanism may further exacerbate the volatility of transaction costs and may also discourage small traders.

Challenges and opportunities coexist

Although Ethereum faces many challenges, it also has unlimited opportunities. With the continuous development of Layer 2 solutions, Ethereum may be able to alleviate network congestion, reduce transaction costs, and improve user experience. In addition, with the continuous improvement of Ethereum 2.0, it is expected to increase the throughput and efficiency of the network, laying a more solid foundation for future development.

Conclusion

As a shining pearl in the blockchain field, Ethereum faces unprecedented challenges and opportunities. The problem of high transaction costs needs to be solved urgently, and the prospects of the fee-based market are also worrying. However, with the continuous advancement of technology and the joint efforts of the community, I believe that Ethereum can overcome the current difficulties and usher in a more brilliant future. Let us look forward to Ethereum's future development path, which will be more stable and brighter.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

The average Ethereum transaction fee has increased by more than 160%. Users are paying higher costs, which has resulted in higher revenue for miners, but this may change in the near future.

Ethereum transaction fees have been rising in May, with the average transaction fee approaching $0.3, which is a cause for concern as it makes using the Ethereum network more expensive.

According to Coin Metrics, the average transaction fee in 2020 so far is $0.15 or 0.00085 ETH. However, the average transaction fee in May alone reached $0.29 or 0.00143 ETH.

While transaction prices are generally higher, there are exceptions. In the case of Synthetix, the average transaction fee for minting SNX is $7.4 at press time.

Ethereum’s core value proposition is the ability to seamlessly transact over the network.

If user activity drops due to high fees, several projects built on the Ethereum network will face reduced transaction volume. DEXs (decentralized exchanges) have the most to lose, as transaction confirmations require on-chain settlement.

There are many reasons for high transaction fees, but one theory is that bullish sentiment has been rising across all cryptocurrencies since Bitcoin's recent halving. In previous bear markets, many investors have been hoarding
Tether (USDT) waiting for the market to switch.

The time to deploy this marginalized liquidity may finally have arrived.

Stablecoins account for about $10.5 billion of the total cryptocurrency market cap, of which $7.3 billion exists on Ethereum.

Since most stablecoins are based on the Ethereum blockchain, the massive shift of stablecoins to more speculative assets such as BTC and ETH can explain the rise in transaction fees.

Miners, PoS, and Scalability

During 2020, miners earned an average of 631 ETH per day in transaction fees. But in May, this average had risen to 1,216 ETH, nearly doubling.

While users are burdened by high transaction fees, miners are excited about the increase in income.

Ethereum co-founder Vitalik Buterin (V God) pointed out that the fees currently earned by miners are higher than the estimated ETH 2.0 staking rewards. This has created a perception that Ethereum is developing into a fee market and the demand for block space will drive up transaction fees.

On May 18, Ethereum founder V God tweeted: "In the past week, Ethereum transaction fee revenue has exceeded the rewards (estimated) that most PoS validators will receive. ZK Rollups
and sharding are coming to increase capacity, but even today, this is an important milestone to achieve economic sustainability."

Note: ZK rollups is a hybrid expansion method that combines on-chain security and second-layer networks through smart contracts and zero-knowledge methods.

Scalability innovations such as Optimistic Rollups attempt to solve the problem of higher transaction fees by allowing more transactions to be processed using the same amount of block space.

As scalability increases, miner income will be the first to be affected.

To make up for the lost profits, the Ethereum network will need to onboard more users so that miners can complete more transactions at lower fees to guarantee income, instead of profitably completing fewer transactions at higher fees.