Financial Education

How To Avoid Traffic Jams On The ETH Network

April 22, 2021

If you’ve been part of the DeFi/crypto world for any length of time (especially in recent months), you are probably aware of the term, “network congestion.” 

Understanding why fees have risen considerably in the last few months would require a lot more time than we have for this post, but we can dive into the world of Ethereum and the ETH Network in an attempt to explain why fees are so high and why transactions are taking so much longer than they used to.

Rise in daily transactions since the network launched in 2016

What Is The Ethereum Network?

Just like Bitcoin, Ethereum runs on its own blockchain, which requires transactions to be verified by minors or nodes on the network. Any token that runs on the ETH Network (essentially, any ERC-20 token), depends on the blockchain for anything (trades, swaps, sending/receiving crypto, etc). 

How Does The Network Become Congested?

To answer this, we’re going to take you back to a time when everyone was commuting to work every morning and evening. When does rush hour traffic occur? Usually when many people are trying to get from one place to another at the same time.

Similarly, the ETH gets extremely congested when many people are attempting to make trades or swaps, conduct transfers, or generate wallets at the same time.

What Happens When The Network Is Congested?

During rush-hour, your commute time goes up and the amount you end up paying for gas also goes up the longer you’re stuck in traffic.

This is also true for the ETH Network. The more requests on-chain, the slower things move, and the more expensive they become. Gas fees are meant to incentivize nodes or minors to verify a transaction. When the network is congested, the demand for minors and nodes to verify transactions skyrockets, which means that the price to get your transaction in front of a node or minor also rises significantly. 

What Can We Do?

Having to deal with sluggish and expensive transactions is understandably frustrating, but it is the unfortunate reality right now as the popularity of DeFi is rising. Until some longer-term solutions can be put into place, there are a few things you can do to try and get around these pesky fees and wait times:

1 - Trade At A Time When The Network Is Quieter

Much like it’s best to travel either before or after (not during) rush-hour, it’s also best to attempt to trade or generate wallets at a time when the network isn’t as busy. The best way to determine this is to do a quick search online for when the best time would be for your area.

2 - Trade In Larger Amounts

Fees are often applied as a set amount rather than a percentage. In other words, if you’re trading $1,000 worth of tokens, the fee would likely be the same as if you were to trade $10 worth of tokens. Conducting your trades in larger batches decreases the amount of fees you’ll have to pay in the long run.

Looking Ahead

Obviously, the way things are now is less than ideal. We at Digifox are optimistically looking forward to ETH 2.0 technology and scaling, or Layer 2 Scaling. This new layer of code will allow for faster and much cheaper transactions, trades, swaps, wallet generations, and more. DeFi is ever-evolving, and we’re excited to have you along for the journey as we navigate it together!

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