The Ethereum blockchain network reaches 165,711 pending transactions, amid an ongoing DeFi craze.
The Ethereum blockchain network is showing signs of a network clog as the median transaction fee and pending transactions soar.
According to data from Etherscan, pending transactions soared to as high as 165,711 on July 22. Pending transactions refer to requests to process payments or smart contracts on the Ethereum blockchain network.
The simultaneous increase in pending transactions and the median transaction fee indicates a spike in demand for the Ethereum blockchain.
It’s a problem in the short-term, a good sign of growth potential for the long-term
The two abovementioned key metrics suggest two things. First, it shows that the Ethereum blockchain network’s user activity is rising and is reflective of the price of ETH. Second, it indicates that the need for ETH 2.0 and second-layer scaling solutions has become direr.
In the near-term, the clog in the Ethereum blockchain network could pose a problem for decentralized application (DApp) and DeFi users.
When DApp users try to send transactions or if DeFi users attempt to convert various tokens through dexes, it could potentially cause delays.
Over the longer term, however, it could lead to an increase in demand for ETH 2.0, as well as a substantial increase in user activity.
Verifiable user activity on DeFi protocols could carry more significance than unconfirmed activity on ICOs. The recent spike in demand was caused by legitimate user demand. In the past, there were instances wherein the Ethereum blockchain was spammed with bot transactions, slowing the network down.
Industry experts believe DeFi protocols or projects have a better value proposition than ICOs that emerged several years ago. Investors say that DeFi protocols have actual functionality and utility, compared to other projects. That could also improve the value proposition of Ethereum and other relevant projects in the network.
Ian Lee, a crypto investor at IDEO CoLab Ventures, said:
“As compared to ICOs that sold the promise of future platforms with future functionality & utility. Today you can invest in a DeFi platform that’s already on mainnet, has processed thousands of tx & secured millions in value, and has functional use (trading, yield, etc.)”
In the medium-term, ETH 2.0 appears to be the most favorable solution to the recent spike in user activity on Ethereum.
ETH 2.0 at a final phase of the launch
A decentralized group of Ethereum developers is close to finishing the development of ETH 2.0. Afri Schoedon, an Ethereum developer, said the Medalla testnet is expected to be the last one prior to the mainnet launch.
“The Schlesi testnet was one of many steps in that direction. The Witti testnet was another. The Altona testnet is yet another. The Medalla testnet aims to be the final one prior to mainnet launch.”
When ETH 2.0 launches, it would bring Ethereum closer to a full pivot to the proof-of-stake (PoS) consensus algorithm. A PoS algorithm would allow for more efficient processing of data and reduce the likelihood of network clogs, as it eliminates miners on the network.