Ethereum is in the midst of a "gas crisis."
At least, that's according to Taylor Monahan, CEO of MyCrypto, who took to Twitter this week to remind users of best practices for setting transaction fees when using the world's second-largest blockchain. The words of concern are warranted – because of changing conditions on the network, there's a possibility users of the startup's wallet software are overpaying for transactions.
In total, ethereum users spent 5,862 ether, or $2.7 million, to send transactions on Monday, an all-time high according to available network data. The culprit? A single exchange, China-based FCoin, appears to be congesting the blockchain with a controversial business model.
"It's [good to remember] what gas actually is, how it works, and why it's necessary… and why this situation is unnecessary," Monahan tweeted.
A measure of computational effort, the price of gas (effectively what users pay to use the network) fluctuates according to demand. And that demand appears to be escalating to unprecedented levels. While December saw a popular digital cat breeding game CryptoKitties overwhelm the network, cumulative gas expenses at that time were less than half of this week's new heights.
"Gas prices not looking good right now," warned Eth Gas Station, a primary resource for ether gas metrics, on Twitter Monday, stating that users should pay $3.20 for a transaction to be accepted, or wait for periods of 30 minutes for that transaction to be accepted into a block.
The situation has since corrected – transaction fees, while still high, have settled relative to Monday's peaks – but still, developers are exploring ways to ensure that volatility is improved.
"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 told CoinDesk.
And what's because, while transaction costs point to a wider scaling issue (as the network reaches its limits, transaction fees increase) there's steps that can be taken to improve costs before ethereum moves into a more scalable architecture.
For example, Monahan said it's due to imperfect tooling, like gas pricing algorithms that occasionally go awry, and human error on behalf users accounts for much of the price rise.
"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."
Gas attacksOne such actor, according to Monahan, is FCoin.
A China-based exchange, FCoin has previously drawn attention due to its novel revenue model, which involves distributing free tokens to users trading on the platform. As detailed by CoinDesk, the model has proved popular, having led the exchange to 24 trading highs of $5.6 billion last month, a figure that vastly exceeded the top exchanges on CoinMarketCap combined.
Behind the ethereum congestion however is that currently, FCoin is running a daily competition, whereby users vote for a token listing by depositing that token – repeatedly – onto the exchange.
As a result, it 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.
"$240,000 burned in gas so far," founder of Fresco, Roy Huang, tweeted on Monday, "If you want this madness, you are in blockchain for wrong reason."
Speaking to CoinDesk, Monahan echoed this sentiment, calling it an "absolutely despicable voting mechanism," that was incentivizing Sybil attacks, a kind of spam attack that swarms a network with false identities.
Sparked in times of network congestion, the result is what ethereum researcher Philippe Castonguay calls a "gas price war," in which users battle for network inclusion by bidding higher fees.
The impact of this is numerous: transactions fees increase, transactions fail due to inefficient fees, and others, out of frustration or accident, send enormously high transaction fees- which drives up the price for everyone else.
It even causes advanced users to collude with miners to skip the transaction fee, Monahan said.
Network fixesBut regardless of the actions of FCoin, developers are emphasizing that there's ways to improve the situation for all users, irrespective of whether that usage is condemned.
"On the recent high gas fees I have to disagree with criticism regarding 'spam transactions,'" Georgios Konstantopoulos from Loom Network tweeted, "We're in a permissionless network. There are no spam transactions. If somebody pays the required fee, the [transaction] is not spam."
As such, there's work being done that can improve the situation, in both the short and long term.
For example, Griff Green has authored a proposal based on research by Alexey Akhunov, in which ethereum adopts a technique inspired by bitcoin, named the "child pays the parent" strategy.
Rather than transactions by the same account being processed separately, miners can sort transactions according to account, and claim a higher bounty by processing them simultaneously, which could be useful for "super users," like exchanges, that send multiple transactions at once.
"Right now the miner is just leaving money on the table," Green told CoinDesk.
Founder of ethereum, Vitalik Buterin, has also authored a proposal, that simplifies the gas pricing algorithm, making it easier to predict what the correct gas price should be.
Down the line, such a simplified algorithm could eliminate the errors of the gas pricing market today. But while it has been broadly well received, it would require all users to upgrade the software.
"It definitely attacks the heart of the problem, but I would be surprised to see this implemented before the end of 2018," Green told CoinDesk.
On the other hand, Green's proposal, that could have a "strong impact on the network," according to Green, only requires the code to be implemented by miners, and wouldn't require a hard fork to improve efficiency.
Green told CoinDesk:
"It effectively adds a feedback loop that can help everyone prioritize transactions effectively."
Bigger pictureHowever, speaking to CoinDesk, Afri Schoedon, a communications manager at Parity, said that underlying the conversation is the bigger issue of scaling ethereum to keep up with user demand.
"In general the gas price market is a good thing, in theory, but in reality clients are at the limit what they can process," Schoedon told CoinDesk.
Castonguay, who is responsible for a short term scaling-measure named GasToken Factory that allows users to profit from cleaning unnecessary data from the blockchain, agreed that scaling was the underlying concern.
"The recent gas price surges are really only a reflection that the ethereum blockchain has been close to its maximum throughput for a while," Castonguay said, "It reflects that people have been using the protocol consistently and that ethereum needs to scale."
That said, scaling solutions, such as sharding, are far-reaching, experimental technologies, and the timeline for their completion is still unknown.
"This is cutting-edge research," ethereum developer Nick Johnson, responding to a disgruntled user, wrote on Reddit, "Nobody else has solved it either. Give it time."
Yet both a scaling and an optimization problem, speaking to CoinDesk, Monahan emphasized that this widens the pool of those capable of assisting in network improvements.
"We all have a role to play in building the future," Monahan said, concluding:
"We should all try to take part in discussions, provide feedback on the tools we are using, and be active participants in this future. The best world is one where we are all working together."
Rachel Rose O'Leary
A top executive at the first US exchange to list bitcoin futures contracts said that the Securities and Exchange Commission’s statement that ether will not be regulated as a security will help pave the way for exchanges to list ethereum futures.
CBOE Global Markets President Chris Concannon made this comment in a statement quoted by Bloomberg, predicting that this regulatory clarity will make the Commodity Futures Trading Commission (CFTC) more likely to approve the listing of ethereum futures, a product that would provide investors with exposure to ether’s price movements without custodial risk.
“We are pleased with the SEC’s decision to provide clarity with respect to current Ether transactions,” Concannon said. “This announcement clears a key stumbling block for Ether futures, the case for which we’ve been considering since we launched the first Bitcoin futures in December 2017.”
As CCN reported, SEC Director William Hinman revealed on Thursday that the agency did not intend to regulate ether — the native asset of the Ethereum network — as a security.
Hinman, who heads the SEC’s division of corporate finance, said that, despite how ether was originally issued, the asset has become sufficiently decentralized that it no longer bears the hallmarks of a security.
“And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions.”
In December, CBOE and fellow Chicago exchange CME listed bitcoin futures, and both have hinted a desire to list more cryptocurrency derivatives products. However, regulatory uncertainty surrounding the status of other cryptoassets has slowed this process.
Earlier this year, CME partnered with a group of cryptocurrency exchanges to create a real-time ethereum price index and benchmark. The move was widely viewed as a stepping stone toward the eventual launch of an ethereum futures product, and the exchange operator confirmed that it was gauging client interest in eventually creating a market for this product.
The ethereum price cracked the $800 mark on Friday, as the market shook off impending regulatory concerns to reach its highest point since early March.
The world’s second-largest cryptocurrency entered the month below $650 but has gone on a tear in the three days since. That rally continued this morning, and the ethereum price broached $800 on Bitfinex shortly before 12:00 UTC.
At the time of writing, ETH was trading slightly below that mark at $799 and boasted a circulating market cap of $79.3 billion.
ETH Price ChartThe rally came on the heels of bullish sentiment from Reddit co-founder Alexis Ohanian, who is also a founding partner of VC firm Initialized Capital. Ohanian predicted that the ethereum price will reach $1,500 before the end of the year, though his comments attracted even more headlines due to the fact that he initially misspoke and said $15,000.
Notably, this price movement appears to indicate that traders and investors are not concerned by reports that US regulators will meet on Monday to discuss whether ethereum and certain other large cryptocurrencies are securities under federal law.
Ether set for 2018 rally?
Independent consultancy firm, deVere Group, said the price of the second largest digital currency, Ether ETHUSD, +4.07% could be in for a record-setting year, predicting the price could rise fourfold.
“The price of Ethereum is predicted to increase significantly this year, and could hit $2,500 by the end of 2018 with a further increase by 2019 and 2020,” wrote Nigel Green, founder and CEO of deVere Group, in an email to MarketWatch.
“This general upswing will be fueled by three mains drivers. First, more and more platforms are using Ethereum as a means of trading. Second, the increased use of smart contracts by Ethereum. And third, the decentralization of cloud computing.”
Green also said regulation in the cryptocurrency sector is inevitable, which will lead to greater investor protection and long-term confidence in the market.
Ether coins, which are underpinned by the Ethereum network, has become the digital currency of choice for new token issuers because of its efficiency and flexibility—the average processing time for transactions on Ethereum is around 14 seconds, compared with Bitcoin’s, which can be up to 10 minutes.
The current market value of Ether is $67.4 billion.
The end of an abysmal quarter for cryptocurrencies appears to be closing after a flurry of trades late Thursday night saw a major price spike.
In just under an hour, prices soared across all major cryptocurrencies with Ethereum reporting some of the biggest gains in the market.
Ether saw a 19.37 percent increase overnight, pushing ETH up to $504.95 as of 9am.
The market-wide shift follows several months of steadily sliding prices for Ethereum, which was worth more than $1,300 in January 2018.
Traders at 8pm saw bitcoin prices increase by more than $1,000, the coin’s best volume increase in its history.
Ether saw the biggest increase, but other cryptocurrencies soared in price in the hour.
Ripple, the third biggest coin by market cap, broke past $0.50, and Litecoin smashed into $131.
The flood of green in the market is a welcome relief for traders who had come to expect gloom from cryptocurrencies.
Ethereum price news: Why did Ether hit $500? How much is Ethereum today?Q1 of 2018 was the worst period for all cryptocurrencies in the markets entire history, with more than half its value being wiped off in three months.
The market has struggled to rebound to earlier predictions that 2018 could be the strongest year ever.
Mid-April was expected to be a strong period, with American traders looking to pay capital gains tax before the deadline.
A strong sell-off period was expected, but not on this scale.
Ethereum spikes were assisted with the launch of Golem GNT, an ICO two years in the making.
Prices across all cryptocurrencies have skyrocketedNicknamed the ‘Airbnb for computers’, Golem connects users with CPU to rent in exchange for GNT cryptocurrency.
The two-year delay caused some to suspect its effectiveness would be less than useful.
Julian Zawistowski, CEO and founder of Golem, told CoinDesk: "This is typical for software development in general, and blockchain in particular, we underestimate the complexity of what we want to do.
“You always underestimate how difficult it is, and this was obviously the case with us.
Will Ethereum continue you grow?
Ether’s price is gaining bullish momentum and is currently placed nicely above $410.00 against the US dollar.
ETH/USD is eyeing a crucial break above $425.00-430.00 on the 2-hour chart.
ETH/BTC was successful in breaking the 0.0600BTC resistance, which is a positive sign.Technically, the 2-hour chart indicators are rising in the bullish territory.
Could ETH/USD Test $450?In the last few analyses, we discussed the importance of the $420.00 resistance zone. ETH/USD seems to be gaining bullish momentum today and it could settle above the mentioned resistance for further upsides in the near term.
Similarly, ETH/BTC continued to move higher and the pair was successful in breaking the 0.0600BTC resistance. In the short term, the pair may possibly correct lower toward the support at 0.0580BTC, which was previously a resistance.
Starting with the 30-minute chart of ETH/USD, the pair formed a decent support base near the $410.00 level. There were multiple attempts to clear $410.00, but Ether sellers failed. As a result, there was a strong bounce and the pair moved above $415.00 and $420.00.
On the downside, there is a connecting bullish trendline forming with support at $411.00. The current price action is bullish and it seems like the pair may continue to accelerate toward the $425.00-430.00 resistance zone.
Moving up to the 2-hour chart of ETH/USD, the pair is about to break an important bearish trendline. A successful 2-hour close above the $420.00 level will most likely increase buying interest in the short term.
If Ether has a bearish reaction in the $420.00-430.00 region, the price may well test a significant bullish trendline with support at $402.00.
Looking at the current technical structure on both charts, the risk skews to the upside in ETH/USD as indicators are turning north. Beyond $430.00, Ether’s price has room to extend its advance up to the $450.00 price zone.
Ether is the currency that fuels the Ethereum ecosystem. In order for any function to occur on the Ethereum blockchain, including the execution of EDCCs, Dapps, and other transactions, there needs to be gas to push it along. Ether is the gas in this circumstance. If you want to utilize an EDCC or develop a Dapp, you will need to furnish Ether – usually in a small denomination per transaction. Making changes or adding new entries to the Ethereum blockchain can require numerous small expenditures (microtransactions) of Ether tokens.
In addition to serving as fuel for the Ethereum blockchain, Ether can be used as a token for Ethereum-platform-based utilities, as a currency to pay for goods and services, and also as an investment.
What are the denominations of Ether?How small of a microtransaction are we talking? Well, one full token of Ether breaks down into a quintillion Wei! Wei is the smallest denomination in which you can transact Ether, just as pennies are the smallest denomination in which you can transact the US dollar. (There are just a lot more Wei per Ether than there are pennies per dollar … a LOT.) Other Ether denominations are a Finney (a thousandth of an Ether), a Szabo (a millionth of an Ether), and a Shannon (aka Gwei or Nano), which is a billionth of an Ether.
How Do I Get Ether?Users can obtain Ether by mining or purchasing.
Mining Ether is a resource-heavy endeavor that currently requires high-powered computing and draws an expensive amount of electrical power. Also, because of the way the Ethereum blockchain is designed, it becomes computationally more difficult to mine Ether as time goes on. As a result, the resource demands of mining become financially prohibitive for many individuals and often require that an individual miner join others in mining pools, or use third-party services.
The second and easiest way to obtain Ether is similar to how you purchase gas for your car: you can buy it with your own money (or with credit, on some exchanges).
Is It Possible To Invest In Ether?Ether is more than a currency. Many regard it as an investment. As Ethereum approaches mass adoption, many believe that the value of Ether will increase dramatically. While there are no shareholder’s rights or dividends through ownership of Ether, it’s worth noting that these attributes are not required of securities that trade on stock exchanges, such that Ether may be considered a security.
How Do I Buy Ether?There are numerous Ether exchanges where a user may purchase their Ether with fiat (government currency) or other virtual currencies. Visit our Exchanges page to see some of these marketplaces.