Transaction fees on the Ethereum blockchain (1) were running at eye-watering highs of $196.638 back in May, making the network unusable for most regular customers during the frantic bull run.
Although the demand is great, proof-of-work (2) networks have a history of overloading and forcing miners to prioritize the transactions with the highest fees. The Bitcoin blockchain experienced a similar problem the year before when it accelerated to a record-breaking $300.331.
The issue is that the high fees undermine one of cryptocurrency's strongest applications, which is the decentralized peer-to-peer transfer system. If transmitting money from point A to point B is prohibitively expensive, millions of would-be users won't take advantage of this technology.
Heavy hitters in the cryptocurrency industry are aware that Vitalik Buterin, the co-founder of Ethereum, cautioned over the summer that the cost of a single transaction could consume a person's whole day's salary, particularly in developing regions.
The daily take-home wage for billions of people worldwide is $16 in Mongolia and $4 in Zambia (3), respectively. Ethereum transactions normally cost between $1 and $20, which is insufficient for them. Blockchain developers are now making a concerted effort to reduce expenses as bear markets shift the focus from growth to operational improvements.
This will also help cryptocurrency reach its full potential, particularly in important use cases like remittances. Recent proposals for solutions include rollups, which group the transactions together and settle them outside of a Layer 1 network.
Similar to cramming more clothes into a suitcase, this is also less expensive and can even be faster because the data is sent back to the server later. This also emphasizes data compression and ensures that each transaction takes up a lot less space, which, combined with ideas like sharding, is extremely encouraging.
However, trading platforms here play a crucial role in communication with crypto enthusiasts directly and also have a role to play as they enable zero-fee transfers, which can help deliver an experience all customers deserve as one where they can also move their digital assets without giving them a second thought as to how much it will cost.
The World Bank data shows that the average cost of sending $200 across borders stood at 6% in the fourth quarter of 2021, and in nations that depend on foreign workers to send money home, it is $12, which is a lot to lose. Zero transactions may revolutionize the game.
In addition, financial services are made available, saving consumers billions of dollars overall. Crypto fans recall the first time they attempted to transmit Bitcoin from one address to another and were met with a wallet represented by a lengthy string of letters and numbers. There was intense pressure to prevent errors and anxiety that the cryptocurrency might be lost forever.
But this need not be the case, as web3 users are already observing the NFT domain (4) craze of replacing crypto wallet addresses with human-readable addresses with catchy domains like .web3, .vr, and .metaverse (5). While this is a positive development, NFT domain marketplaces provide a fashionable decentralized service.
The cost of cryptocurrencies can frequently be very intimidating for those who are not tech-savvy, but when zero-fee transfers are introduced, this problem will be solved. In an ambitious effort to make crypto far less intimidating for novices and much more beneficial for seasoned users, even more practical features are on the way.