What to do when it's *way* too expensive to send your cryptocurrency 💗
We're all feeling the pain of high ETH gas costs right now, so I thought I'd share some thoughts about how we may navigate the present, and what the future holds.
As ETH continues to break all-time highs, this has obviously been very beneficial to those who own some. Because SEEDS are ETH-based, and therefore trade on DeFI exchanges like Uniswap (as the DeFi ecosystem itself is built on top of the Ethereum cryptonetwork) ETH's success has driven an increase in the market value of SEEDS as well.
But there's an unhappy side effect. Just as with Bitcoin before it, when ETH's market value has surged, gas fees - aka the costs paid in ETH to complete a transaction on the network - have gotten to sometimes insane levels, making it cost-prohibitive to initiate smaller transfers at all.
So what happens now?
The Ethereum team has been working to address this issue (and others relating to scalability) via the ongoing 2.0 upgrade.
Phase 0 went live on December 1st of last year.
A big part of what Ethereum 2.0 is working to accomplish will be a transition from what's called Proof of Work to Proof of Stake.
Both Proof of Work and Proof of Stake are what are known as "consensus mechanisms," a means of achieving "distributed consensus" necessary because in the world of cryptocurrency, a centralized entity (to varying degrees, depending on the project in question) is not calling the shots.
Proof of Work systems like the one Bitcoin pioneered require mining, and mining necessitates such intensive energy consumption that it creates legit environmental concerns. Proof of Stake doesn't.
Ethereum started out with a Proof of Work system as well, and it's the Ethereum miners charging us these crazy fees.
When mining, computers solve complex cryptographic mathematical problems, a competitive activity undertaken to write transactions to a new block. These blocks are then added to the blockchain, the immutable ledger underpinning the network.
Miners do this because they receive rewards in the form of coins. Bitcoin miners receive Bitcoin, Ethereum miners receive ETH, etc.
The aforementioned "gas fees" are paid to miners for processing transactions. Miners determine these fees, and can decline or prioritize a transaction depending on what someone is willing to pay.
This design is problematic for increasingly obvious reasons.
When the team behind ETH migrates to Proof of Stake through Ethereum 2.0, miners will be rendered obsolete. The upgrade is intended to improve overall network efficiency, including a substantial reduction in transaction fees. It will also eliminate the environmental concerns mining creates.
But it's important to recognize that the portion of the upgrade that will address gas fees may not happen until Q3 of this year - months away. The Ethereum team has also been delayed in releasing upgrades in the past, included Phase 0 of this one.
So what do we do in the meantime?
Those of us who are fortunate enough to be able to do so can make fewer cryptocurrency transactions of larger size, rather than many smaller ones.
There are also what are called 'Layer 2' solutions like, Quickswap and Honeyswap, that can make engaging with DeFi cheaper because they take place off the blockchain (and therefore don't require gas payments). However, liquidity is much lower, and you still have to pay higher gas fees to get to Layer 2 in the first place.
I think it looks like Uniswap's upcoming V3 upgrade should address these issues anyhow, which would probably make other Layer 2 tools less necessary, because Uniswap is the biggest decentralized exchange.
It's also worth nothing that there are alternative blockchain projects out there that claim to be potential "Ethereum Killers" - Cardano and Fantom are two, and to some extent Polkadot is as well - and while those projects are certainly worth keeping an eye on, after a good deal of reflection and research, my instincts are telling me to stick with ETH.
Assuming it addresses its issues in a timely manner, I wonder if it's just too far ahead in terms of network effects.
So what it comes down to is that I have confidence that this will be fixed in the shorter term, but there isn't a lot that we can do besides the above until Ethereum makes these moves.
In the interim, if you've tried to redeem a SEED to make a Request for Help but couldn't afford the gas costs, you're very welcome to email us at team@seedsgives.com. We will do our best to help.
Once these hurdles have been crossed, I think the future looks bright.
I even wonder if ETH's network effects won't trump Bitcoin's deflationary design down the line, and made a TikTok to discuss.
If you'd like to learn more and haven't yet watched our webcast, it can offer a solid overview of how cryptocurrency and DeFi work.
And as ever, if you'd like to help someone in need, and receive 100% of the value of your gift or more in SEEDS, you're welcome to do so below.
When you choose the recurring giving option, this can function like Dollar Cost Averaging, except that you're helping people in need simultaneously, and 100% of what you give (minus any transaction fees) goes to people in need.
As of this writing, SEEDS are up 2,900% in market value in less than a year.
Supporting folks in need through Seeds can be a wonderful way to build abundance yourself...and through redeeming SEEDS, our community can be there for you when you could use a little help too.