Bitcoin and Ethereum Users Debate Scalability as Gas Fees Increase

The recent surge in transaction fees on Ethereum and Bitcoin has sparked a heated debate about scalability solutions and the role of layer 2s.

Over the past 24 hours, crypto users have shared screenshots of double and even triple-digit transaction fees on Ethereum and Bitcoin. One screenshot showed that Ethereum’s high-priority transactions had gas fees of up to $220, while others showed fees of around $100. Bitcoin users, on the other hand, reported fees of around $10 for high-priority transactions. Although this is relatively low, the average Bitcoin (BTC) transaction cost has been around $1 for the last three months, according to BitInfoCharts. BTC fees have not been this high since May.

At the time of writing, a transaction from an Ethereum hot wallet with a transfer of $300 on the Uniswap decentralized exchange has a network cost of $45.65, according to a test transaction conducted by Cointelegraph.

The rise in gas fees has prompted supporters of Solana and other blockchains to emphasize how much cheaper their transactions are. For example, “Bobby Apelrod” on Twitter noted that Solana charges $55-60 per minute for all Solana users, while each “poor Ethereum user” has to pay the same amount for a single transaction. KaisaCrypto also noted that “currently, #PulseChain gas fees are 4’000X cheaper than Ethereum and 14’000X cheaper than Bitcoin.”

The price of network fees is dynamic and depends on demand or how congested the network is. An increase in on-chain activity is usually observed during bull markets or when crypto sentiment is strong, but an additional side effect is the impact on lower-income users. “How does this help the unbanked and lower income population,” Lopez asked in a post that showed a “high priority” Bitcoin transaction fee of $10.50 on Nov. 9.

Before the fee spike, the average Ethereum transaction cost was $11.35 on Nov. 8, according to BitInfoCharts. A few weeks earlier, on Oct. 14, it had fallen to as low as $1.40 – the lowest level recorded in 2023. Ethereum’s gas fees peaked at $196 on May 1, 2022, while fees were consistently above $20 between August 2021 and February 2022.

Scale the base layer or rely on L2s?

The developers of Bitcoin and Ethereum have given priority to decentralization and security on the base layer, while entrusting the execution environment of many of their transactions to layer 2s, in order to reduce costs.

The Lightning Network is used to scale Bitcoin, while Ethereum is supported by several layer 2s, such as Arbitrum, Optimism and Polygon, with transactions typically costing less than $1.

Justin Bons, founder of the cryptocurrency investment firm Cyber Capital, believes that the base layer should be the only transaction environment, advocating for monolithic blockchain architectures in which consensus, data availability and transaction execution are all handled on the base layer, as is the case with Solana.

However, Bitcoin and Ethereum are modular blockchains, as they transfer some transactions to a second layer, a fact which has been challenged by critics who point to various outages on Solana due to network congestion, arguing that a modular blockchain design is a better way to address scalability.