Gas prices on Ethereum posted fresh all-time highs on Tuesday as making a transaction now requires bidding more than 450 gwei, according to EthGasStation. Fees reach as low as 2 gwei in calm periods and were previously considered high at 30 gwei.
The gas price is a generalized indicator of average prices, but translating it into actual transaction costs is not straightforward. Since different types of transfers consume varying amounts of gas, there is a very significant difference between simple Ether (ETH) transfers and interacting with a DeFi smart contract.
Transferring Ether around only takes about $4 as of press time — a far cry from Bitcoin (BTC) transfer fees of more than $50 at the peak of the 2017 bull market. Transferring tokens is more expensive, with a gas cost of about $17 as of writing. But interacting with decentralized finance protocols has now become so costly that all but the wealthiest of users are priced out of DeFi.
Making a simple Ether to Dai (DAI) exchange on Uniswap requires $55 in gas fees. Curve estimates a price of $33, while a trade on Mooniswap will cost over $80. Supplying an asset to Compound similarly requires about $57, while on Aave it requires $44.
At these gas prices, using these protocols becomes either impossible or uneconomical. In order for the gas cost on a DEX to be equivalent to a traditional exchange fee of 0.2%, one must trade at least $27,500 worth of assets in a single transaction. A user depositing 5,000 DAI on Compound would need to wait over 40 days to break even on gas — even when factoring in the COMP rewards.
Despite all this, Uniswap is breaking all volume records as more than $680 million was traded in the last 24 hours — more than major centralized exchanges like Coinbase Pro. According to DappRadar, Uniswap saw about 16,500 unique wallets interacting with the protocol in the last 24 hours. That yields an average transaction size per wallet of $41,000, which suggests that these gas fees are not a major issue for Uniswap’s current users. It is likely that a portion of the users will be using multiple wallets, pushing the true average even higher.
The highest volume pair on the exchange is SUSHI/ETH at about $140 million. Joining the pool lets its liquidity providers earn the SushiSwap token, a direct Uniswap code fork that aims to bring a fair token distribution — triggering one of the largest yield farming manias yet.
Yields on farming the SUSHI token currently range from 1,000% to 3,000% annualized, or slightly less than 1% daily. Curiously, farmers appear to be opting primarily for the SUSHI/ETH pool — the only circular pool that requires first buying SUSHI to earn it, even though its yield is only “average” at 2,000%.
The likely reason is that it makes it easier to compound the rewards, as farmers do not need to constantly sell the SUSHI they obtain into two separate tokens. Furthermore this encourages a Ponzi-like mechanism where new farmers boost the profits of existing participants by driving demand for the token.
It is worth noting that Uniswap is now the single largest gas guzzler according to EthGasStation, closely followed by Tether and the alleged Ponzi scheme Forsage.