Sign In   Register

Layer-2 and multi-chain DeFi platforms see record inflows as Ethereum fees soar

High transaction fees have been a persistent thorn in the side of investors and blockchain projects since at least 2014 when Ethereum Network co-creator Vitalik Buterin stated in reference to Bitcoin, “The ‘Internet of Money’ should not cost $0.05 per transaction. It's kind of absurd.” 

Fast forward to November 2021 and the simple act of approving a token so that it can be transacted on Uniswap can cost as much as $50 worth in Ether (ETH)  depending on the time of day.

Average Ethereum gas cost. Source: Etherscan

Even layer-2 solutions, which were billed as the protocols that would help solve the fee issue, have been unable to escape the high-fee curse of congested networks as new users onboard into the cryptocurrency ecosystem by the day.

As a result of persistently high Ethereum fees, a growing number of users are bridging assets to lower-cost Ethereum Virtual Machine (EVM) compatible networks. Data from Dune Analytics shows that the total value locked on bridge protocols has been on the uptrend since the beginning of October.

imageTotal value locked on Ethereum bridges. Source: Dune Analytics

As shown on the chart above, the Ronin bridge has become one of the more popular protocols over the past month thanks in large part to Axie Infinity users migrating assets to the lower fee platform.

The popularity of Axie Infinity is shown in the following chart from Token Terminal displaying protocol revenue.

imageTop projects by cumulative protocol revenue in the past 7 days. Source: Token Terminal

Related: How to take full advantage of the benefits of DeFi and increase high-interest savings

The third-ranked protocol by revenue is PancakeSwap (CAKE), a high TVL DeFi protocol on the Binance Smart Chain that offers significantly lower transaction fees than those found on Ethereum.

A majority of the top gainers in terms of TVL over the past week are also protocols that are either found on Ethereum competitors or offer multi-chain functionality in side-chain environments.

imageTop projects by TVL trend in the past 7 days. Source: Token Terminal

Avalanche, Abracadabra.money, Yield Yak, Benqi, SpookySwap and Loopring are also multi-chain or Ethereum side-chain compatible networks which have seen a significant bump in TVL in the last 7 day.

Unless something can be done in the near term about the high transaction cost on the Ethereum network, the trend of liquidity being migrated to other blockchains is likely to continue.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Original author: Cointelegraph By Jordan Finneseth
“PlugWalkJoe” indicted for $784k cryptocurrency th...
Indiana’s Star Bank Launches Bitcoin Trading Servi...
 

Comments

No comments made yet. Be the first to submit a comment
Already Registered? Login Here
Guest
Tuesday, 30 November 2021
If you'd like to register, please fill in the username, password and name fields.

By accepting you will be accessing a service provided by a third-party external to https://www.flipmycrypt.com/

Cron Job Starts