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Ethereum Gas Fees Reach Peak Levels
Gas fees on the Ethereum network have soared to levels not seen since March 2023, driven by the growing interest in a new experimental token standard known as ERC-404. On February 9, Ethereum gas prices soared to an average peak of 70 gwei, equivalent to $60 for a standard transaction. Several factors contribute to the heightened gas fees, but the primary catalyst has been the hype surrounding the ERC-404 token standard. This excitement has led to a substantial increase in trading activities, particularly those highlighted by projects such as Pandora and DeFrogs. These ERC-404 initiatives, among others, have generated over $600 million in trading volume in the past week alone, as reported by crypto data aggregator Birdeye.
Introduction to ERC-404 Token Standard
ERC-404 aims to link ERC-721 non-fungible tokens (NFTs) with ERC-20 tokens, enabling the creation of fractionalized NFTs. This allows multiple users to collectively own a single NFT and utilize their share for trading or collateralizing loans. This new “standard” has opened up a Pandora’s box on crypto twitter over the last couple of days.
Unofficial Decentralized Architecture
This unofficial decentralized architecture seeks to combine characteristics from both sectors, allowing developers to mint fractionalized NFT collections that users can trade in open markets like Uniswap. While the standard is currently unofficial, there are rumors of a proposal to address this and unlock extra utility such as staking.
Challenges and Optimization Efforts
Despite being unofficial, the standard has garnered significant attention within the crypto community. The developers behind Pandora are actively working on optimizing gas costs associated with ERC-404 transactions. According to PopPunk, co-founder of Gaslite, an ERC-404 token consumes approximately three times more gas than an average NFT transaction.
Uniswap Drives Surge in Ethereum Network Activity
On February 9, the Ethereum network experienced a surge in activity, largely driven by increased usage of the decentralized exchange protocol Uniswap. Data indicates that a significant portion of the Ethereum burned during this period resulted from activities on Uniswap. This heightened activity on Uniswap can be attributed to substantial trading volumes generated by projects such as Pandora and DeFrogs, along with other ERC-404 projects.
Ethereum Co-founder’s Perspective
During a Reddit ask-me-anything (AMA) organized by the Ethereum Foundation’s research team, Ethereum co-founder Vitalik Buterin highlighted that the gas limit had not been increased for nearly three years. Buterin expressed his opinion that a modest gas limit increase was reasonable even at that time. He suggested that such an increase could lead to a limit of around 40 million.