Ethereum Clog Inflates Gas Prices, Raises Transaction Costs

On Tuesday, MyCrypto, self-described as an “open-source interface for the blockchain that eases the process of storing, sending, and receiving cryptocurrency,” accused an unnamed cryptocurrency exchange over Twitter of contributing to the Ethereum network’s recent clog. A commenter on the thread later revealed the exchange to be China-based FCoin.

FCoin was launched by the former CTO of Huobi, Zhang Jian. Last month, Huobi announced plans to create its own blockchain.

MyCrypto said that FCoin “has come up with a mind-numbingly despicable voting mechanism that, quite literally, incentivizes Sybil attacks.” Essentially, users on the exchange vote for token listings via a “cumulative deposit number ranking,” which means one deposit equals one vote. MyCrypto contends that individuals with financial incentive to list their tokens on the exchange have been “sending out these tokens en masse to separate accounts on the blockchain and then to separate accounts on [FCoin].” The result, according to MyCrypto, is the Ethereum network’s current congested state and higher transaction fees.

Within the past few days, the Ethereum transaction fees increased dramatically, peaking at over 5,860 ETH collected on July 2, according to Etherscan. Gas prices have also spiked during this period, but not as dramatically as the transaction fees. This indicates a significant number of high-volume transactions.

In response to the network congestion, exchange Binance has temporarily increased its withdrawal gas price to 180 Gwei, though withdrawal fees remain the same.

Many point to the increase in gas prices as resulting from issues with scalability, which has long been a criticism of the Ethereum blockchain. The creator of Ethereum, Vitalik Buterin, critiqued the network’s lack of scalability himself:

“Scalability sucks; the blockchain design fundamentally relies on bottlenecks where individual nodes must process every single transaction in the entire network.”

This roadblock in blockchain’s path to ubiquity has prompted developers to find solutions. One recent advancement is sharding, which basically silos users into “shards” that are distinct from the main chain. Transactions would be processed per shard rather than across the entire base layer of the blockchain.

The long-awaited proof-of-stake protocol Casper should also help improve scalability. Ethereum’s core developers are in the process of fusing sharding and Casper, but it will likely take quite some time before any changes are made to the mainnet.

Another option is the Plasma framework, which features a cluster scaling solution called MapReduce. Buterin and Joseph Poon, co-author of the Lightning Network white paper, explained that MapReduce allows for “high-scale computation, with time or speed tradeoffs. These tradeoffs produce a network where nodes assert computation and participants are responsible for verifying them.” Users would only monitor the chains they were affected by as opposed to every chain, thus minimizing the amount of computational effort within each chain.

Efforts to scale Ethereum still have a way to go, though, as represented by the network’s recent clog.

However, it is notable that Golem founder Julian Zawistowski does not see the Ethereum clog as an issue with scaling at all, but with incentives.

Daniel Putney is a full-time writer for ETHNews. He received his bachelor’s degree in English writing from the University of Nevada, Reno, where he also studied journalism and queer theory. In his free time, he writes poetry, plays the piano, and fangirls over fictional characters. He lives with his partner, three dogs, and two cats in the middle of nowhere, Nevada.

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