Surge in DeFi Activity Causes Ethereum Transactions to Reach Its All-Time High, ETH 2.0 Testnet Launch Coming Soon

Although the price of ETH hasn’t been showing much movement recently, the Ethereum blockchain network is witnessing a massive surge in daily transaction volumes.

As per the recent data, ETH transactions have reached close to its previous all-time high of 1,350,000 daily transaction during the peak of crypto market in January 2018. Last Friday itself, the Ethereum network executed around 1,070,000 transactions.

Well, so if the ETH price is showing very little momentum, what’s causing the daily transactions volume to surge all of a sudden? Well, it the sudden surge in daily transactions of the DeFi tokens available on the Ethereum network.

Decentralized finance (DeFi) applications and its use-cases have seen a massive demand over the last few months. The capital tied to DeFi applications has reached a new record historical high of $2.71 billion.

This year in 2020, DeFi projects like Compound, Balancer, Aave, and Synthetix has gained massive popularity which is directly synchronous to the surge in Ethereum transactions.

Moreover, each interaction with DeFi protocols is like borrowing funds, locking funds, or locking of tokens needs one and more transactions to be executed on the Ethereum network. The recent introduction of ‘yield farming’ has brought another storm of increased DeFi activity on the platform. Yield farming allows DeFi users to collect rewards for interacting with different popular protocols.

But the recent surge in transaction volumes can lead to reaching the maximum technical capabilities of the Ethereum platform. This has resulted in the simultaneous surge in transaction costs and gas price on the Ethereum blockchain.

The technical infrastructure of the existing Ethereum blockchain network has much limitations when it comes to the scalability of transactions. The current Ethereum blockchain can process only 15 transactions per second.

The answer to Ethereum’s scalability issue is the upgrade to Ethereum 2.0 network. The Ethereum 2.0 will be able to process several thousand transactions per second thereby resulting in a significant increase in the scalability of the network.

The developers of Ethereum 2.0 say that they are making a significant progress in the development of the network and we can expect the launch of ETH 2.0 testnet very soon. The project coordinator, Danny Ryan, explains: There is a little bit of stability work going on and other than that the blocker is some UX things (trying to make key management as close to mainnet as possible).