On Tuesday, the average transaction fees on the Ethereum network climbed to a new peak at above $10, and gas prices went past 450 Gwei.

In response, stablecoin Tether, the second biggest guzzler of gas, is planning to add support for ZK-Rollups. In this technique, many transactions are bundled into a single one, after integrating with OMG Network. This will reduce the pressure on the Ethereum network, which is congested amidst growing usage.

Ethereum co-founder Vitalk Buterin has also been advising using layer2 solutions like OMG Network and Loopring.

This much activity is because of DeFi mania, especially Uniswap, which is the biggest guzzler of gas and spent $12.7 million in fees in the past 30 days.

With demand so high, people are bidding higher and higher transaction fees, which while pushing the fees further higher, is forcing the smaller payers to drop out of the DeFi craze.

But this demand and supply, Buterin says, will manage the fees itself at 465 gwei, the level everyone is comfortable with.

Because when a bunch of people drop out, not finding it worthwhile to send transactions at such a high price, the remaining transactions will keep the blocks empty, meaning if they lower fees, they still get included. And then, everyone would lower their fees.

Buterin says, the solution of Ethereum Foundation refunding 80% of everyone’s fees doesn’t work because then people would bid even higher fees, and EF will be paying the amount instead of using it to scale Ethereum.

What could work is “increasing transaction capacity,” and the right estimate is “a 1.17x increase in gas limit implies roughly a 1.17x decrease in fees.”

But increasing capacity has its issues in terms of Ethereum nodes already running near their limits and risk of DoS attacks.

While EIP 2929 was published today that would increase the gas cost for particular sensitive operations, the solution is drastic increases in scalability through rollups and sharding.

But of course, sharding has been in the works for years, and though the testnet Madella is running smoothly until it officially goes live, there is no knowing when it is here.

In the meantime, the fees debacle could turn out to be a disaster for the DeFi users.

“I can see people having to pay 5 ETH in gas to exit with the stampede,” said trader and economist Alex Kruger, who says Ether fees going from bad to worse is not a matter of if but when.

When a deleveraging event happens, and everyone tries to cash out at once, things will break, and “fees will be brutal,” said anonymous trader lowstrife.

“Yield farmers must be alert AF to exit before the herd,” said Kruger.

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The post Ethereum Network Needs 'Drastic Increases in Scalability' to Tackle the Skyrocketing Fees: Vitalik Buterin first appeared on BitcoinExchangeGuide.

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