“New people wanting to swap dollars for ethereum and build on top were finding the fees completely prohibitive,” Mr Warwick told the Blockchain Australia event.
“But there has been so much work done on scaling the ethereum blockchain that there is a really credible case for new entrants where it is viable for them to transact.”
Alternative blockchains
The average fee of an ethereum transaction is about $10, after it had surged as high as $55 late last year. Ethereum gas fees are paid to the “miners” who maintain and secure the growing blockchain network.
The fees are calculated on computing power costs and the time it takes to verify the existence of every token and where that token has previously been.
Ethereum’s high transaction costs have encouraged alternative blockchains including solana, which can theoretically process 65,000 transactions a second compared to ethereum’s 15 a second and bitcoin’s seven a second.
Other developers are creating efficiencies on the ethereum blockchain to make it more competitive. These are known as “Layer 2” solutions and include StarkNet, Polygon and Optimism.
Maple Finance, a Sydney-based start-up that offers fast and easy crypto borrowing for institutional clients, has found the falling gas fees mean corporates are more eager to experiment with decentralised finance technology.
You can go to the supermarket 24 hours a day, but the whole financial economy just stops outside of nine-to- five hours.
— Sid Powell, Maple Finance co-founder
“They want to participate, but they can’t build banking applications when the fees are high,” Sid Powell, co-founder of Maple Finance, said.
“But as they come down, we are having more conversations with institutions wanting to learn how to they can use crypto.”
DeFi is primarily concerned with reprogramming existing banking services such as lending, borrowing and trading onto blockchains, stripping out the centralised risk of banking institutions and their corresponding fees.
“You can go to the supermarket 24 hours a day, but the whole financial economy just stops outside of nine-to-five hours,” Mr Powell said.
“But it’s really hitting home that if Australia wants to be integrated as part of the world economy, we need the technical infrastructure that can keep going at all hours of the day and night.”
Despite last week’s outage, the ASX is working on redesigning the underlying CHESS infrastructure that powers its securities business with a view to use blockchain technology for clearing and settlement.
While gas fees have been a problem plaguing ethereum projects for some time, Robbie Ferguson, co-founder of Immutable, a Sydney-based start-up that builds NFT marketplaces for other tech companies, says fees ultimately need to go to zero for DeFi to challenge existing banking services.
“When it comes to NFTs, the costs need to go zero for it to be mainstream, and ultimately we need to iron out the user experience, so people don’t know they’re using NFTs,” he said at the Blockchain Australia event.
Mr Ferguson said Immutable facilitated more than 2 million NFT transactions over the past month using its faster scaling solution, while the broader ethereum network completed 1.1 million transactions.
“This kind of speed will lead to mainstream adoption faster,” he said.
