Are Ethereum Fees Low Enough To Support DeFi Now?

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DeFi has become all the rage but just like 2017 which stopped a lot of growth due to high fees and slow throughput on blockchains we again hit the same thing in the DeFi era. With NFT's in high demand and DeFi booming Ethereum prices saw all new highs but also all new highs in terms of fees getting all the way up to $70!

For the every day user this made it impossible to use Ethereum in terms of making any kind of money or transactions in DeFi. NFT's where ok but with the high fees it limited some lower end artwork etc which honestly is fine.

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It begs the question now are Ethereum fees low enough now to start supporting DeFi again?

The short answer kinda/sorta

At the moment the full TVL in defi is about 59 billion dollars worth this sets up back to March of this year levels. Still far higher than we where a year ago when DeFi really didn't even exist it's market cap at the time was just 1 billion.

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Even at $3 per transaction this still counts a lot of lower players out of the Ethereum DeFi space as most are a few transactions to take place. In order to stake and convert into a DeFi Ethereum project you're look at about 3-4 transactions in total or a total cost of $12- $20 might not seem like a lot but if someone wants to add in $100 they are now set back 20% if they add in $1,000 they are now set back about 2% doesn't seem that high but it actually is. It means if you want to still play in the defi space you should be adding in roughly $2,000+ on your transactions to make them break even as quickly as possible.

The sweet spot seems to be $1.50 or less in transaction fees with a decent turn around in terms of time. If this is achievable which is what we saw when many abounded Ethereum and instead went to Binance that sweet spot was under $1 which allowed almost everyone to take part.

Granted Ethereum is MUCH easier to access over Binance for the every day user.

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What I fear is these lower fees are going to set the dev team back in their chairs again and not push as hard to figure out PoS and lowering fees on the Ethereum network. We saw this happen when we went into a bear market after the 2017 rally and 3 years later we fell into yet again the SAME issues. If they don't get it fixed this time around I'd honestly would have lost hope for Ethereum and instead moved on to another up and coming crypto which has already solved these issues.

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7 comments
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Maybe the world will try to break Hive next. 😁

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Maybe! There are a number of projects to be released by end of year that have good potential

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Just wondering is the Defi transactions in ETH the same as BSC? You pretty much pay for like 3-4 transactions for each FARM add?

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Depends if you do a farm there's a few conversions that have to happen in order to pair and stake it.

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(Edited)

Hi @bitcoinflood

I enjoyed this post.
I think this part is key to understanding the cost issue:

Even at $3 per transaction this still counts a lot of lower players out of the Ethereum DeFi space as most are a few transactions to take place. In order to stake and convert into a DeFi Ethereum project you're look at about 3-4 transactions in total or a total cost of $12- $20 might not seem like a lot but if someone wants to add in $100 they are now set back 20% if they add in $1,000 they are now set back about 2% doesn't seem that high but it actually is. It means if you want to still play in the defi space you should be adding in roughly $2,000+ on your transactions to make them break even as quickly as possible. Plus you can afford to bump your gas fee up from 45 to 80 to make sure you get filled when you making 900 plays on an arbitrage play or taking profit on the way up or down. As long as you bought enough to make a real profit Ethereum is still good.
You just have place the trade and go get something to drink. Sitting with eyes glued to the screen is self abuse. LOL

People need to understand this to understand why Ethereum continues to grow its DeFi offerings in the face of so called high gas fees. Plus you can pay more to speed up your transactions. When your making 900 dollars the 2% hurts, but it’s a small price to pay for the profit.

The recent ERC255 or EP155 really reduced gas fees and improved transaction speed, but it was followed by the flood of doggie meme coins, which clogged Ethereum for a while, but it was short lived. Unfortunately those tokens dropped rapidly in value and liquidity evaporated due small value of assets versus trading fees. The move to BSC for these coins makes sense from this perspective, and humorously the sheer volume of doggie coins fleeing Ethereum created new nodal issues on BSC LOL.

The Soave is often filled with people jumping out of the frying pan into the fire, as FOMO continues to reck traders. Sigh.

In any event thanks fir adding your perspective to this area, as w e see new programs we need unattached skeptical views to keep us safe.

🦁

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