Ethereum’s capacity to handle transactions has been significantly boosted with the increase in gas limits, marking a major milestone since late 2021. This adjustment is expected to improve network throughput and enable the creation of complex decentralized financial applications.
Ethereum Raises Gas Limits for First Time Since 2021, Boosting ETH Appeal
Ethereum Network Enhances Transaction Capacity with Gas Limit Increase
Ethereum's gas limit is a measure of the maximum amount of computational effort that can be expended on the network.
In August 2022, the gas limit was increased to 150 million, allowing for more complex 'smart contracts' and larger transactions.
This increase aimed to improve scalability and reduce congestion on the network.
The new gas limit enables developers to build more resource-intensive applications, driving innovation and growth in the Ethereum ecosystem.
Ethereum’s capacity to handle transactions has been enhanced as validators agreed to increase the gas limit to nearly 32 million units. This marked the first significant adjustment since late 2021 and the first in the post-Merge era.
The gas limit on Ethereum reached nearly 32 million gas units as of Tuesday morning with a maximum expected capacity of 36 million units. The last significant increase was in 2021, when the limit jumped from 15 million to 30 million gas units.
This change was implemented after more than half of the validators supported the adjustment, which was enacted automatically without the need for a hard fork (or a split in the network). On Ethereum, gas is a unit that measures the computational work required to execute operations like transactions or smart contract functions. Each operation has a gas cost associated with it, ensuring that users pay for the exact amount of computational effort their actions require.
What Does This Mean for the Ethereum Network?
The gas limit is the total amount of gas that can be used in a block. If transactions in a block exceed this limit, they are either delayed to the next block or must compete for inclusion based on the gas price offered. Raising the gas limit allows Ethereum to process more transactions or more complex operations within each block, thus improving network throughput and allowing the creation of sophisticated decentralized financial (DeFi) applications with minimal downtime.
The Ethereum network throughput refers to the rate at which transactions are processed and confirmed on the Ethereum blockchain.
As of 2022, the average transaction time on Ethereum is around 12-15 seconds.
This is significantly slower than some other blockchains, such as Visa's, 1,700 transactions per second.
However, Ethereum is working to improve its scalability through upgrades like Serenity and sharding, which aim to increase throughput to thousands of transactions per second.
Higher gas limits also mean less congestion during peak times, which can make the network costly to use and turn users away to cheaper networks such as Solana. More network utility can add to investor demand for ETH, helping buoy the world’s second-largest token that has fallen out of investor favor in the past year.
Impact on Ether (ETH) Price
Ether (ETH) slumped Sunday to its lowest level against bitcoin (BTC) since March 2021 as the world’s second-largest token extended losses against its larger rival. One ether dropped to 0.03 BTC in January, almost 50% lower than a year ago, as bitcoin soared in the run-up to U.S. President-elect Donald Trump’s inauguration.
Historically, ether‘s price has been volatile, reaching an all-time high of over $4,000 in ‘May 2021’.
Factors influencing ether‘s price include adoption rates, regulatory changes, and technological advancements within the Ethereum ecosystem.
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The exchange rate for the two tokens, conventionally called the ETH/BTC ratio, peaked above 0.08 in 2022 and ETH’s value proposition has been on the decline ever since.
Upcoming Pectra Upgrade
In addition, the upcoming Pectra upgrade is expected to double the capacity of layer-2 networks — or blockchains that operate atop Ethereum — by increasing the blob target from 3 to 6. ‘Blobs‘ are large data packets used by layer-2 networks to store data for a certain time period, with 3 blobs included in each Ethereum block as of Tuesday.
