It is a good thing that Ethereum 2.0 will go live within a few months, because Ethereum’s current blockchain is creaking and squeaking all over the place. Between May 1 and May 31, 1,228,131 transactions by users failed. An incredibly expensive joke because they lost the transaction fees.
Another month has passed and I honestly find it quite amazing #Ethereum still has any value. Flawed & vaporware PoS is still "just around the corner" and the amount of failed yet payed for transactions keep increasing. Another 1.3 added this month!
Sauce: https://t.co/ki7rU1ZaiT https://t.co/WA5iZVqoTK pic.twitter.com/C9BZzKxO1h
— ∞ SF ∞ (@artdesignbySF) May 31, 2022
Why does Ethereum still have value?
These failed transactions have caused hilarity among bitcoin maximalists, a collective term for bitcoiners who don’t care about altcoins. For example, the famous pseudonymous twitterer (and bitcoiner) @artdesignbySF wonders why ‘the great Ethereum still has value’.
1 million failed transactions per month
His (or her) data comes from blockchair.com, a website where you can follow so-called on-chain data from various blockchains, including Ethereum. According to this website, at least 1 million transactions fail every month, despite the fact that the user has paid for them.
The twitter above shows that 1 million transactions also failed in April, and that number increased by 200,000 last month. If you look at all failed transactions in the history of Ethereum, you will see that 2% of them took place last month.
Paying for failed transactions
When a transaction on the Ethereum network fails, you are still charged. Transactions fail when there is not enough ‘gas’ (transaction fee) to pay for a transaction, or when a smart contract rejects a transaction.
There is still a charge for failed transactions, because miners must confirm transactions on the blockchain, whether they succeed or fail. And you pay for that, regardless of whether your transaction goes through or not. So you only lose transaction fees, not the coins sent (if all goes well).
Too few transaction fees
If a simple transaction fails, you have probably paid too little gas. You can solve this by adding more gas before you start a transaction. For example, in the popular wallet MetaMask you can choose a fast transaction, and then automatically more gas will be charged. In practice, it is usually sufficient to choose ‘normal’ or ‘fast’ in MetaMask, and if the gas prices change, you have in any case sent enough to allow the transaction to go ahead.
Too little liquidity
Another form of unsuccessful transactions often takes place on decentralised exchanges (DEX). Suppose you are trading on UniSwap, SushiSwap or 1Inch, there is a big chance that you are executing several transactions at the same time. It sometimes happens that a smart contract rejects the transaction.
This can be because you have not given enough gas or because there is a slippage problem. The latter means that there is not enough liquidity to execute your transaction at your price and as a result the exchange rejects your transaction.
This is easy to fix. Go to the settings of your favourite decentralised exchange and increase the slippage. Most traders recommend to go for 3%. If the prices of the coins you are trading go up and down very quickly, you may need to execute a transaction very quickly and adjust the slippage upwards (for a truly illiquid and fast coin, 15% is not unheard of).
Waiting for Ethereum 2.0
Looking at the 1.2 million failed transactions, you can see that all transaction costs were higher than zero, some gas was sent along but this was apparently not enough in many cases. Unfortunately, the transaction costs of failed transactions are not returned.
The arrival of Ethereum 2.0 and its proof of stake should ease that pain. Vitalik Buterin, Ethereum’s founder, says transaction costs will drop significantly after the upgrade. Developers of Ethereum are confident that the upgrade can be carried out as early as August, but we have heard these noises before.
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Steven Gray is an experienced cryptocurrency and blockchain journalist with over 7 years of reporting on the crypto industry across major publications. His proficiency in technical analysis provides him the skills to evaluate complex trading algorithms and AI systems. Steven leverages his extensive network of academics and finance professionals to incorporate expert opinions into his unbiased analyses.
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