Coinbase Pro has announced that it is going to stop absorbing gas fees for Ethereum transactions—and will start passing the buck directly to customers.
In a series of tweets on Sep. 17, the exchange said decentralized finance’s explosion in popularity, alongside wider levels of crypto adoption, were key factors in its decision.
With networks getting more congested because of higher numbers of transactions (and gas fees going up as a result,) it seemed inevitable its policy of paying customers’ gas fees wouldn’t be sustainable forever.
The company stressed that it doesn’t charge fees when crypto is being transferred from one wallet to another, or between verified Coinbase accounts.
“It’s our goal to make interacting with crypto as seamless and user friendly as possible,” the company said. “By being transparent about our fees, it’s our hope that we will arm our customers with the info they need to make informed decisions that best suit the needs of their particular situation.”
How it’s going to work
Coinbase Pro said it will estimate how much network transaction fees will be in advance, in an attempt to give its users some transparency. However, it did warn that there may be some fluctuation between the estimate and what the transaction actually costs.
It’s perhaps no coincidence that total transaction fees on the Ethereum network have been going through the roof in recent weeks—hitting record highs that even the bull run of 2017-18 couldn’t match.
Eight hours before the exchange’s announcement, the monitoring resource Glassnode revealed that close to $1 million in fees was spent in a single hour. The surge came after the Uniswap Protocol revealed plans to launch its own token, UNI.
A fiery response
Needless to say, Crypto Twitter didn’t respond kindly to Coinbase Pro’s move—and some even predicted that it could affect the company’s standing in the market. The CEO of the DeFi lending platform Kava Labs, Brian Kerr, warned:
“When large businesses like Coinbase can no longer absorb ETH fees, it means retail will start shifting elsewhere.”
Kerr wasn’t the only one who took time to absorb the significance of the announcement. Rami, another Twitter user, wrote: “TLDR: gas fees are now too high for mega exchanges too. yikes.”
Others described the new policy as the last straw. Many users have already been disgruntled by the outages that Coinbase has experienced—which tend to coincide with high levels of volatility in the crypto markets.
During one of the more recent bouts of disruption back in June, the founder of Crypto Capital Venture, Dan Gambardello, tweeted:
“Dear @coinbase, I ask this with much respect – How does an exchange with an $8 billion valuation crash every time Bitcoin pumps 5%? I genuinely would like to know.”
Are high fees here to stay?
DeFi’s boom has made the much-delayed Ethereum 2.0 upgrade even more urgent, amid fears that existing infrastructure simply can’t cope with current transaction volumes.
Thankfully, the first phase of ETH 2.0 moved one step closer this week when Danny Ryan, the Ethereum Foundation’s lead developer, published an official proposal for the upgrade to get underway.
Ethereum 2.0 will move the Ethereum blockchain from an energy-hungry, proof-of-work consensus mechanism to a faster, more energy efficient proof-of-stake (PoS), in which validators post what amounts to a bond for good behavior.
It’s hoped that this will substantially increase the number of transactions that the blockchain can handle, and in turn, this should take the heat out of gas fees.