Consistently full blocks are the primary reason why gas prices are reaching all-time highs.
The problem will not be solved
A report by analytics provider Coin Metrics explored the world of Ethereum transaction fees, stating that they are still at their highest and that even too many upcoming network upgrades are unlikely to alleviate the problem.
Median fees on Ethereum were consistently over $ 10 for most of 2021, according to the Ethereum Gas Report published by Coin Metrics. By comparison, the average Ethereum transaction fee reached just $ 5.70 at the peak of the 2017/2018 bull run.
Part of this increase was attributed to the increase in ETH prices, which would make the gas more expensive. Since the beginning of 2021, ETH has risen 125% from current prices despite a 19% correction from its all-time high of $ 2,050. However, the median gas price increased by 532% in the same period.
Different types of processes require different amounts of gas. A simple ERC-20 token transfer uses far less gas for an automated market maker than a complex smart contract transaction, for example. However, the main reason for high gas fees is more transactions in general rather than DeFi.
Ethereum transactions are currently being auctioned, those who pay more gas get miner priority, and those who set a lower gas limit receive faster transactions.
It was explained that miners need to determine which transactions to include when issuing new blocks, and each block can only contain a limited number of transactions (160 to 200 on average) due to the maximum block size.
The report notes that the highly anticipated EIP-1559 network upgrade, designed to replace the auction mechanism and burn some of the fees, is unlikely to solve the problem of high gas costs.
Coin Metrics explained that the upgrade will only help make the fees more predictable, as the high fees are due to scalability issues.