Over the last couple of weeks, the Ethereum Network has experienced increased activity and peak fees. In fact, in late September, the fees paid by users on the Ethereum network surpassed bitcoin fees. On September 22, the average standard fees for Ethereum ranged between $0.045 and $0.064, whilst the bitcoin transaction fee was only $0.03.
While this was at first viewed as a bullish indicator by Ethereum enthusiasts, a new report by Glassnode revealed that an alleged Ponzi scheme was congesting the Ethereum network. Also, Ethereum prices declined through the late weeks of September. However, the amount of ether locked in decentralized finance (DeFi) has continued to rise.
Notably, the high transaction fees narrative has changed after the key contributor to this insane fee eruption collapsed.
Ethereum Fees Drop
Last week, the Ethereum network was processing a large number of smart contracts and ETH transfers which caused the unbelievable spike in transaction fees. While most people pointed to the growing number of decentralized finance (DeFi) apps and Tether smart contracts as the habitual big gas consumers in the ethereum network, the real culprit is FairWin. FairWin, the ethereum-based gambling app, spent a phenomenal 59% of ethereum’s gas as of September 24. A game this big can not only disrupt other applications but also deter its own players from having their transactions included in a block.
Moreover, various developers revealed that the FairWin contract contained critical vulnerabilities. Some even opined that FairWin was the fastest-growing Ponzi scheme on the ethereum network. Notably, on September 21, the alleged Ponzi’s value peaked at over $10 million. However, the contract which held a total of 54,894 ETH a few days ago is currently empty according to Etherscan. This has, bizarrely, led to a huge decrease in the transaction fees and also network activity on the ethereum network.
Per data provided by Etherscan, transaction fees on ethereum which had topped at 1,627 ETH last week, have since declined to 510 as of October 1, the network utilization has plunged from a record-breaking 95% to 81% over the last 48 hours and the average price of gas has slipped by close to 50% since the rare event witnessed last week.
Begone Demon! Chinese Ponzi FairWin just collapsed. Ethereum gas prices are finally back to the affordable 1 gwei 🚀🚀 pic.twitter.com/GshM5qmbeL
— Boxmining (@boxmining) October 1, 2019
Ethereum Is Still On Track; Istanbul Hard fork Looming
The collapse of the Fairwin Ponzi scheme seems to have led to a notable decline in network activity within the ethereum network. However, ethereum remains fundamentally sound. Ethereum’s upcoming hard fork upgrade, Istanbul, is set to start on October 2. It will entail six codebase changes, also known as Ethereum Improvement Proposals (EIPs).
The Istanbul update will first be rolled out in test nets before moving to the mainnet in the first quarter of 2020. With Istanbul, the ethereum network will be more scalable, secure, decentralized and with greater interoperability with privacy coin Zcash. In addition, Istanbul will also incorporate the proposed Progressive Proof-of-Work (ProgPoW) mining algorithm, among other perks.
What’s Next For The Price Of ETH?
Fortunately, ETH price depends on a lot of other factors besides on-chain activity. In addition, the volatility seen in gas prices has had an insignificant effect on ETH price.
The substantive network improvements, on the other hand, are expected to be a bullish indicator for ETH investors. Since late last month’s market-wide sell-off, ETH has been struggling to climb back above $200. As if that wasn’t enough, the network continues to have bottleneck scalability issues. This Istanbul update could help the second-ranked crypto reverse the downward trend. Also, improving the functionality of the network will, in the short-term, keep ethereum users on the network, instead of moving to rival networks.