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According to Cryptoflows, there is a significant flow of assets from Ethereum to Binance Smart Chain (BSC).
Migration from Ethereum to BSC
The shift to moving assets from the legacy smart contract network may be driven by a desire to avoid high gas fees.
A fee is charged for every transaction made on public ledgers such as Ethereum and BSC. On Ethereum, gas fees remain higher, especially for users deploying smart contracts.
An analysis of the latest trends in gas fees on Etherscan shows that network fees have fluctuated and tended to rise in recent weeks. As of May 17, the gas fee was 43 gwei, or approximately $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 dollar terms is clear and may explain why users are looking for alternatives by moving assets from Ethereum to alternative blockchains like BSC that offer lower gas fees.
The reason is PEPE FOMO?
The recent surge in Ethereum gas fees can be partly attributed to the hype surrounding PEPE, a meme token. As PEPE stimulated demand and boosted activity on the network, Ethereum gas fees rose at the same time. According to Y-Charts, gas fees on Ethereum have increased from $43 on April 22 to $155 as of May 5, 2023.
Unprecedented demand for PEPE due to fear of missing out (FOMO) coincided with an almost exponential rise in fees from the last week of April to early May.
This surge highlighted the scalability issues that Ethereum faces during periods of increased activity.
Fluctuating gas fees based on network activity is one reason why developers are looking to integrate long-term solutions, including on- and off-grid scaling methods in the first place.
Ethereum Price May 17 | Source: ETHUSDT on Binance, TradingView
According to the roadmap, Ethereum will introduce Sharding, where the network will be broken into pieces called “shards”.
Shards are subnets that will become part of the entire Ethereum blockchain. Each shard will process transactions independently but remain connected to other shards. In this system, Ethereum developers hope to increase the throughput of transaction processing on the network by lowering the fee. Shards remain an idea and are being studied.
With this in mind, Layer 2 scaling options are gaining popularity as a means of improving scalability by redirecting transactions to an off-chain platform, offloading the underlying blockchain, and reducing processing fees.
L2Beat currently shows that there are over 20 layer 2 scaling options designed to scale the mainnet. Arbitrum and Optimism, the two most active general purpose platforms for deploying smart contracts and decentralized applications, are the most active. The two, Optimism and Arbitrum, control more than $7.5 billion in assets, as measured by total value locked (TVL).
Optimism will release the “foundation” via a hard fork in early June 2023. This update aims to improve scalability, improve transaction speeds, and reduce gas fees in an offline solution. With these improvements, Optimism hopes to gain more market share by increasing its TVL.
