There is a substantial flow of assets from Ethereum to the Binance Smart Chain (BSC), according to data of Cryptoflows.
Ethereum migration to BSC
The shift to move assets from the legacy smart contracting network could be driven by a desire to escape high gas fees.
For every transaction executed on public ledgers like Ethereum and BSC, a fee is paid. On Ethereum, gas fees continue to be higher, especially for users implementing smart contracts.
Analysis of the latest gas rate trends on Etherscan indicates shows that network fees have been fluctuating and generally higher in recent weeks. As of May 17, gas fees stood at 43 gwei or roughly $1.59 for simple transfers.
Meanwhile, BscScan data shows that users have to pay 3 gwei for transfers, regardless of the urgency of the transaction.
The difference in gas fees between Ethereum and BSC, when analyzed in USD terms, is apparent and could explain why users are looking for alternatives, moving Ethereum assets to alternative blockchains like BSC that offer lower gas fees. .
Is PEPE FOMO the reason?
The recent increase in Ethereum gas fees can be attributed, in part, to the hype surrounding PEPE, a meme token. With PEPE stimulating demand and forcing increased activity on-chain, Ethereum gas fees rose in tandem. According to Y-Charts, gas fees on Ethereum increase from $43 on April 22 to $155 on May 5, 2023.
The unprecedented demand for PEPE out of fear of missing out (FOMO) coincided with the almost exponential increase in rates from the last week of April to early May.
This spike highlighted the scalability challenges Ethereum faces during peak periods.
Fluctuating gas rates, depending on network activity, is primarily one of the reasons developers are looking to integrate durable solutions, including on-chain and off-chain scaling methods.
According to the roadmap, Ethereum will introduce Sharding, where the network will be divided into portions called “shards.”
Shards are subnets that will be part of the whole Ethereum blockchain. Each Shard will process transactions independently but will remain connected to other Shards. In this system, Ethereum developers hope to scale the throughput of on-chain transaction processing, reducing fees. The fragments are still an idea and are being studied.
Given this, Layer 2 scaling options are gaining traction as a means to improve scalability by redirecting transactions to an off-chain platform, alleviating the underlying blockchain, and reducing processing fees.
L2Beat currently shows that there are over 20 Layer 2 scaling options with the goal of scaling the main network. Arbitrum and Optimism, two of the most active general purpose platforms for implementing smart contracts and decentralized applications are the most active. The two, Optimism and Arbitrum, control over $7.5 billion of assets measured by total value locked (TVL).
Optimism will release “base”, via a hard fork in early June 2023. This upgrade aims to improve scalability, improve transaction speeds, and reduce gas fees in the off-chain solution. With these improvements, Optimism hopes to gain a larger share of the market, driving its TVL higher.
Featured Image from Canva, Chart from TradingView
