With the cryptocurrency market experiencing explosive highs at a rate that rivals even the famous 2017/2018 bull market, many investors, both small and large, are looking to engage with the industry. Substantial amounts of money are pouring into crypto, and in the last three months alone the total market cap grew from $500 billion to $1.7 trillion (a staggering 240% increase in value). 

 

However, with all this good news there comes a problem. This boom in the market is largely driven by the rise in DeFi platforms, the vast majority of which run on the Ethereum network. Projects such as AAVE and Compound both provide decentralized trading and lending options by relying on Ethereum’s ecosystem, and in doing so they are congesting it (along with other DeFi projects), as every transaction is handled individually, causing more traffic and raising transaction rates.

 

Congestion causes ETH transaction fees (called “gas”) to rise because everybody wants their transactions to be fulfilled as fast as possible, driving them to pay a premium to get their actions placed on the blockchain ASAP. This is especially important when trading and lending, as the crypto market is volatile and the wait for a transaction to get placed on the blockchain can be the difference between a small fortune and a manageable loss. 

 

High gas fees hurt the individual

 

For people and companies moving large quantities around, trading, lending, and transaction fees are usually nothing more than a small annoyance as they have the financial power to continue unphased by them, but for the small lender, they can be detrimental. On February 20th, the average ETH transaction fee is $23.03. For those who do not move thousands of dollars at a time, this number acts as the ultimate deterrent, forcing people to reconsider whether their lending and borrowing plans.

 

What’s worse is that it acts as a poor representation of the industry as a whole; at its heart, cryptocurrency was meant to be a tool that allowed the individual to have autonomy over their finances, but with gas fees this high the desire to engage in cryptocurrency begins to disappear. 

 

How to lower ETH gas fees

 

ETH gas fees are caused by Ethereum’s congested network, which is due to poor optimization coupled with the industry’s reliance on the network as a whole. There are only two solutions to bringing these fees down.

 

The first solution is to hope that the cryptocurrency industry begins to wane, therefore lowering transaction fees, however, nobody wants that to actually happen as the industry has now cemented itself as such a significant part of the financial and tech world.

 

The second solution is to alter Ethereum’s infrastructure so that it can handle the congestion. This is currently in the works, with Ethereum 2.0 (Serenity) being released, altering Ethereum’s consensus algorithms, and the development of 2-layer scaling, which would open the network’s pathways leading to less congestion. However, 2-layer scaling is still new and being tested.

 

What are people to do?

 

The unfortunate reality of Ethereum’s scaling issues is that, with no immediate end in sight, people who wish to borrow and lend are forced to do so on networks unaffiliated with Ethereum, unless they can afford to incur the gas fees. Luckily, there are Ethereum alternatives on the market which have significantly less volume and congestion. DeFi borrowing and lending platforms such as JustLend which runs on Tron, Venus.io which runs on the Binance Smart Chain, and Equilibrium which runs on EOS are all available and as they do not run on Ethereum they are still suitable for people at the lower end of the economic spectrum. All the platforms listed are unaffected by ETH gas prices as they run on entirely separate networks, integrating into different ecosystems. A possible downside to these options is that their user-base is limited as they are using lesser-known networks, but this does not prevent people from engaging in them, and adoption is only a short-term issue as recognition for the crypto industry as a whole has been increasing at a rapid rate. 

 

Ethereum is going through a tough time during this recent increase in crypto activity, and in turn it is causing some crypto users to look into projects which run on networks that compete with it, and until Ethereum fixes the issues within its system, these users are more or less forced to find other platforms as they simply cannot handle the fees. Luckily the industry has grown substantial enough that there are alternatives on the market for people who wish to borrow or lend crypto.