Ouriel Ohayon, CEO of ZenGo, a cryptocurrency wallet, shared some tips for alleviating the high fees of Ethereum.
Original title: “An article explains why the Ethereum fee is so expensive and the solution” (High network fees: pains, explanations, and solutions)
Author: Ouriel Ohayon, CEO of ZenGo, a digital wallet
Translation: La
The author of this article is Ouriel Ohayon, CEO of ZenGo, a digital wallet. He explained how to deal with high network fees from the perspective of wallet operators.
Network fees are a core part of the user experience. Even if we don’t earn anything from internet fees, we still need to provide you with the best “paid experience”.
In the past few weeks, our users have suffered, but the industry has also suffered. Network fees have reached an absurd level, and it is extremely uneconomical to execute almost any type of transaction on Ethereum or even Bitcoin.
A transaction on Ethereum and Bitcoin costs $10 (in most cases more than $10) and any decentralized application (abbreviated as: Dapp) that uses smart contracts, the transaction fee can be as high as 30 to 40 dollars.
The good news is: the rate level has returned to an acceptable level, and people can use Bitcoin and Ethereum normally. The bad news: the cost is still relatively high.
Next, we will explain what happened to the fees of Ethereum and Bitcoin in the past few months, and our future plans to deal with such problems.
What is the network cost and not what
Before we delve into it, we want to explain some things about fees.
We know that you are learning about Bitcoin and the crypto economy recently, and you are learning a new language when you study the crypto ecosystem. Especially after using the “bank” service for many years, sending a transaction means paying a fee to the bank.
But decentralized cryptocurrencies are different. Unlike centralized services, ZenGo does not charge any fees for sending or receiving transactions. However, when sending any kind of transaction, you have to pay network fees.
Network fees are not charged by ZenGo
These network fees are used to pay to the network of miners, who are responsible for processing and verifying your transactions on the blockchain. Those expenses are rewards for their work. Based on the value of the fee, your transactions are validated and prioritized, thus affecting the speed of transactions. Simply put: the less fees you pay, the slower you can process transactions.
Network fees are not calculated as a percentage of the amount you send. Blockchain does not work like this. This sounds reasonable, but the fees in the blockchain are almost the same regardless of the amount. The cost of sending 1 USD of Bitcoin or 1 million USD or 100 million USD of Bitcoin is similar. Network fees are generated by the processing of complex calculated transactions on the blockchain.
These fees are always calculated and named in cryptocurrency, although for your convenience, we use local currency to express them. When checking fees, you should first look at the value of cryptocurrencies. This explains why the same fee may be different in dollar prices, because it depends on the value of the cryptocurrency you use.
In addition, network fees are fluctuating and change at any time based on the number of transactions processed at the same time (and other factors). The same transaction may require a network fee of US$0.10 or US$50, depending on how busy the network is when you are trading.
Finally: depending on the blockchain you use, network fees are very different in cost and calculations. There may be different fees for sending 1 USD of ETH and 1 USD of BTC.
Why are network costs soaring?
In the past few weeks, the new generation of investment and transaction services in the Ethereum ecosystem (also known as DeFi) has seen a frenzy, which has led to a substantial increase in the number of transactions. Therefore, the Ethereum network has become saturated and network fees have become very expensive, damaging all services including ZenGo.
Every service in ZenGo is much more expensive than usual. The savings function we used on Compound has become unusable for small deposits. Many people feel “cheated” because the withdrawal fees are unacceptably high. We have to increase the minimum amount required for the exchange service to restrict users from exchanging small amounts of currency at unreasonable fees. As mentioned above, the inconvenience caused to you is beyond our control, for which we apologize.
Over a period of time, millions of dollars are spent every day. It may take a day for a transaction to arrive, and sometimes it takes longer. crazy.
This not only affects the fees of Ethereum, but also the fees of Bitcoin. why? Because there is a large amount of BTC stored as collateral and “locked” in the Ethereum blockchain to provide additional liquidity for these services. This has led to a spike in Bitcoin network fees.
Unconfirmed transactions in Bitcoin’s Mempool over the past few weeks.Source: https://jochen-hoenicke.de/queue/#0,24h
Is everything back to normal?
In the past few weeks, the situation has eased. Many DeFi tokens and services have lost momentum, and activity has dropped significantly.
Fees have decreased back to acceptable levels
The fee reaches a more reasonable level (as we said, the ETH fee is about 0.5 US dollars per transaction), and many people may find that the services we provide can be used again (including sending, investing in savings accounts or crypto assets in ZenGo Between transactions).
Some people may still feel that the fee is too high. Obviously, everyone wants the fee to be as close to free as possible. We (and all other wallets) also like this to happen. This is a win-win situation for both the wallet and the customer.
In other words, network costs are variable and may change quickly.
What can you do now to avoid high fees?
Here are some tips to ease the situation:
1. For non-urgent transactions, wait for a better time.
2. Pay more attention to savings: Now, if you plan to use small amounts of money or use the savings function for a short time, don’t do it. Interest is not enough for handling fees. It is painful to say that, but that is the truth. This is a temporary situation and it is hoped that it will be resolved soon.
3. Monitor expenses, so you can find the best time to operate. We have built a new tool to track Ethereum fees. There is also a very good tool for Bitcoin, which is also one of the inspirations we used to build Ethereum tools. You may find that certain times of the day are “cheaper” than others. Find them and trade them when they are cheap.
4. Before confirming the order, check your transaction fees.
5. If you need to transfer funds, use a “cheaper” blockchain. For example, Tezos and Terra (both supported by ZenGo) are now particularly cheap.
6. Get free rewards by inviting friends. This is a great way to add some pocket money to pay for your expenses.
7. Be extra patient. Blockchain transactions are not instant. Realizing this is a good first step. The less commission you pay, the more time it will take to complete the transaction. Cheap does not always mean “better”.
8. Track your transactions on the blockchain browser directly from ZenGo. Click on any pending transaction in ZenGo to find its current status.
9. Make sure your push notifications are on. This is how we notify you of the “transaction arrival”, you don’t have to worry about it.
10. If you have any questions, please contact our 24/7 customer service. Our answer is quick and we will help you.
Fees are much lower on alternative blockchains, such as TerraUSD.
What is ZenGo going to do with this?
We all know that a good “paid experience” is one of the important pillars of a great wallet. Although we hope that the cost will not increase in the future, history tells us that the cost is likely to soar again. In order to reduce similar incidents in the future, we are making some improvements.
Some people think that we should refactor our code to pay the lowest possible cost, things are not that simple. Paying very low fees may mean that your transaction will be unreasonably delayed, and sometimes your transaction will not be processed at all.
But we can definitely do better and make this one of our top priorities in the coming months.
The ZenGo team is doing
1. Before you pay, it will make it clearer and easier for you to understand what you are paying and why you should pay, especially during peak periods.
2. Confirm that you are about to pay unusually high fees and help you make better decisions.
3. Optimize our algorithm to find the best and cheapest cost model.
4. Provide tools that allow you to better control the fees you need to pay.
5. Support more blockchains that can better handle large-scale transactions, and provide a convenient way to access or trade these assets.
6. Implement solutions that can help reduce load and significantly reduce high costs.
You will notice these improvements in the coming weeks and months. As always, we welcome new ideas and suggestions. Contact us: contact@zengo.com .
Source link: zengo.com
