On July 2, Ethereum transaction fee reached 5,862 ether surpassing its all-time high in January of this year with 3,696 ether. Many users were shocked by this jump not to mention the number of ether transactions that temporary clogged the network. The culprit was a China-based cryptocurrency exchange that is looking to compete against Binance, currently the title holder for the world’s biggest crypto exchange in terms of volume. The rise in the number of transactions has temporarily crippled the world’s second largest cryptocurrency for a few hours. It has prevented different decentralized apps and ether users from sending transactions without spending so much on transaction fees. The reason behind this was FCoin’s voting process.
FCoin Air Drop
FCoin cryptocurrency exchange came up with a plan to list digital assets on its platform. Candidates of the exchange listings are required to airdrop tokens to the users of FCoin exchange who will then vote to pick the digital assets to be listed on that day. The Assets that have the highest number of votes are then picked by FCoin Exchange and can begin the integration process.
The voting process that requires airdrop is a tricky process of distributing a large amount of tokens to a particular user. Airdrops are used usually by new crypto projects. This is a strategy that is used mainly in order to increase the adoption of the tokens. Blockchain projects are usually distributing their tokens to both Bitcoin and Ethereum users in order to achieve active users that they can recruit to their community.
To give you an idea regarding the extent of the number of transactions, an airdrop to a hundred thousand users will mean one hundred thousand transactions as well. This is all because each FCoin is issued with one token in order to vote.
How it Clogged The Network
To give you an idea, Ethereum right now can barely handle around 1 million transactions on daily basis. However, Vitalik Buterin already addressed this concern saying that with innovative scaling solutions to the table such as Sharding and Plasma, the Ethereum Network can scale up the number of transactions that it can handle to 1 million transactions per second.
According to Vitalik Buterin, “If you value a transaction getting included right now at $1, you would be willing to bid anything up to $1, but if everyone else is bidding $0.05, then you could keep more money by bidding $0.08 instead”.
This proposal is a price auction for the fee model wherein the users can bid a price of their choice. Once the auction is done, the lowest fee that a miner is able to accommodate will then be applied to everyone. This can be a good deal especially for the miners since the miners can manipulate the price. However, the main idea is to enable a minimum transaction fee within the network.
Recently, Ethereum along with Bitcoin have been considered by the US Securities and Exchange Commission as commodities. With this news, will this prevent Ethereum’s price to spike up?