Although high gas fees on the Ethereum network are making it challenging for retail investors to interact with DeFi protocols that is not the case with Whales. Since the beginning of last year, the DeFi sector has seen a lot of attention because of its latest innovation as well as profitable opportunities provided to crypto holders.
DeFi sector experiencing growth pains
The sector is has been witnessing growth pains and the high gas fees exacerbated this last week. Interestingly, the absence of an ideal layer 2 solutions could be pushing retail investors away from decentralized finance. For instance, retail investors trying to trade on Uniswap or approve a new token on their most preferred platform will have noticed the impact these actions could have had on their Ethereum Wallets.
Etherscan data shows that although the gas prices are soaring they are yet to reach the highs reported in December 2020. Most importantly, the surge in gas fees coincides with the soaring Ether price. Interestingly, an analysis of different time zones indicates that transaction costs occurring in the US trading session are comparable to those in the Asian trading session. The comparison is an indication that the fees are a result of network usage and underscores the significance of the 24-hour crypto market.
High gas fees making it hard for small wallet holders
Whale token holders have benefited significantly from the sudden network fees surge. When looking at wallets that had over 20 ETH in 2020, there is a higher number of ETH transactions compared to those coming from smaller ETH wallets which correlates with increases in the fees. Large wallets holders tend to engage more with protocol when there is congestion because the large wallet balance is not affected much by growing transaction costs
Basically, a $20,000 trade and a $200 trade on Uniswap cost the same at around $50 given the current conditions. This makes it less likely for smaller wallet holders to trade because the cost of the trade will be 25% of total value against 0.25%.