Complaints about the high cost of transactions on the Ethereum blockchain are nothing new, but now those “gas” fees are being blamed for the failure of a crypto crowdfunding bid to buy a copy of the U.S. Constitution.
ConstitutionDAO’s bid to buy a rare, 1787 copy of the U.S. Constitution at Sotheby’s fell flat on Nov. 18 after it was outbid by hedge fund billionaire Ken Griffin, who paid $41 million ($43.2 million after auction fees). That was double the estimated price of $15 million to $20 million.
The decentralized autonomous organization was created on the Ethereum blockchain in an attempt to buy one of the 13 existing copies of the Constitution that were printed after the Continental Congress drew up America’s founding document. In little more than a week, the group raised more than $47 million in what has been called a “financial flash mob” — but was unable to bid more than $40 million after accounting for auction fees and the costs of transporting, maintaining and displaying the document.
According to many in the crypto Twitter-sphere, the villain of the story are the gas fees paid out by the 17,437 donors, who gave an average of $206.26 to the cause.
“The gas fees spent would have made up the different [SIC] of winning the auction,” tweeted Dennis Hegstad, co-founder of LiveRecover, an SMS marketing app focused on converting abandoned Shopify carts into sales, just minutes after ConstitutionDAO announced its loss.
If the gas fees didn’t exist; the gas fees spent would have made up the different of winning the auction
— dennis hegstad 🤠 (@dennishegstad) November 19, 2021
He was not alone. When ConstitutionDAO tweeted that it would be refunding donations “minus gas fees,” donor @PhilidorRX tweeted: “Damn so my $120 contribution less $60 of gas fees is worth $60 and now you’re gonna send it back to me with $60 of gas fees so I get nothing lmao. Keep it!”
Damn so my $120 contribution less $60 of gas fees is worth $60 and now you’re gonna send it back to me with $60 of gas fees so I get nothing lmao. Keep it!
— phil (@PhilidorRX) November 19, 2021
A Clogged Pipeline
Like bitcoin, Ethereum’s gas fees vary widely by type of transaction, and can be shocking for an industry that touts low-cost transaction fees as one of its biggest advantages.
On Nov. 22, the average gas fee was $12.81, according to Etherscan. But the average cost of transferring an ERC-20 token — the technical standard for any cryptocurrency that runs on Ethereum — was almost $40, while a transaction on the leading decentralized exchange Uniswap was more than $122.
A similar, though currently less severe, problem is making bitcoin essentially useless as a currency for small purchases — buying a $5 coffee with a $2.45 transaction fee (as of Nov. 22) doesn’t make much sense.
For Ethereum, the problem is that with the booming popularity of decentralized finance (DeFi) services and the soaring NFT market, it is clogged with far more transactions than it can handle. Ethereum is limited to roughly 15 to 30 transactions per second (TPS), triple that of bitcoin, but just a fraction of the 1,700 TPS averaged by Visa — which claims a potential top speed of 24,000 TPS.
That low speed and the high gas fees it creates are among the key reasons for the years-long Ethereum 2.0 project, which aims to process 100,000 TPS. The problem led some commenters to blame ConstitutionDAO’s decision to use the Ethereum blockchain for its fundraising.
Twitter user @maxwellhwhite asked, “How much money was wasted in total on gas fees? Why did you do this on ethereum and not solana? You probably threw away $10 million+ of your own money from gas fees.”
Solana is one of several so-called Ethereum-killer blockchains that can do everything Ethereum can, far faster and cheaper. Solana claims it can handle 50,000 TPS at an average transaction price of $0.00025.
Complaints about the cost of Ethereum transactions are hardly limited to ConstitutionDAO supporters. In a Nov. 21 tweet, Zhu Su, CEO of Singapore-based crypto hedge fund Three Arrows Capital, announced, “I have abandoned Ethereum despite supporting it in the past.”
Yes I have abandoned Ethereum despite supporting it in the past.
Yes Ethereum has abandoned its users despite supporting them in the past.
The idea of sitting around jerking off watching the burn and concocting purity tests, while zero newcomers can afford the chain, is gross.
— Zhu Su 🔺 (@zhusu) November 21, 2021
Accusing the blockchain’s developers of having “abandoned its users despite supporting them in the past,” Zhu said, “[t]he idea of sitting around … while zero newcomers can afford the chain, is gross.”
All of that said, not all of the crypto Twittersphere blamed ConstitutionDAO for the loss. Others noted that bidding against a billionaire who was clearly determined to win the Constitution was a lost cause from the start.