Cryptocurrency Ethereum was caught in a Catch-22 situation, as a China-based business model – Fcoin triggered a massive spend of $2.7 million purely as transactional fees on Monday.
CEO of MyCrypto, Taylor Monahan has said that it is vital that users are cautious when setting transaction fees on Ethereum. Taylor words are marked by the community as diverse changes in conditions of work, and the over-priced transaction fee.
Monahan expressed his angst in a tweet, “It’s [good to remember] what gas actually is, how it works, and why it’s necessary… and why this situation is unnecessary.”
Price of gas is defined as the fee which users pay in order to use the network. In routine trading conditions, the price of gas will change with the demand for it. Lately, such demand has grown beyond possibilities and is escalating to high levels.
It was found that in December, digital cat game, Cryptokitties, had set the network on over flow. The total gas expenses were considerably high.
“The problem is what is causing these fees to go up and how that affects to the usability of the blockchain in a broader sense,” Monahan said. According to leading ether gas measuring website, Eth Gas Station, the gas prices were not very high. The prices are $3.20 if a transaction is accepted. Again the wait period is roughly 30 minutes before it is placed within a block.
Lately, there has been a correction with this regard. The situation has substantially increased, with transaction fees being high and only the relative sluggishness of Monday mornings peaks. The main issue for developers to overcome is the volatility.
Monahan says that, “The fees are very high due to a few events over the past few days that have increased demand [and] a few parties who have external factors that make paying exorbitant transaction fees worthwhile.”
At the end of the day, it was found that one exchange was at the centre of the sharp pricing. The business model which Fcoin used was responsible for the upward push. Fcoin had taken to giving away free token to all users on the platform. This was well accepted by traders and in the last month the exchange saw nearly 24 trading highs previously; this was way ahead of the other top exchanges.
Additionally, it also has a daily challenge. Here, the users will have to vote for a token and will list its deposit for that token. This led to “spurred token developers to send out airdrops to a multitude of accounts, sparking hundreds of thousands of transactions, a gesture that for many in the ethereum community was not well received.”
A justified solution for this complex and controversial business model by FCoin was recommended by Loom Network’s Georgios Konstantopoulos. “We’re in a permissionless network. There are no spam transactions. If somebody pays the required fee, the [transaction] is not spam.”
Experts such as ethereum founder, Vitalik Buterin, said that it could simplify the algorithm used for gas pricing. This will in turn allow prediction of gas prices correctly, he claimed.