Ethereum [ETH] Unaffected by Gas Limit Increase by Miners: Research

By Nivesh Rustgi
Published July 28, 2020 Updated July 28, 2020
Best Buy In

DeFi Platform



ethereum transaction fees

Ethereum [ETH] Unaffected by Gas Limit Increase by Miners: Research

By Nivesh Rustgi
Published July 28, 2020 Updated July 28, 2020

As the fees of Ethereum transactions were increasing across the board, the miners decided to increase the GAS limit from 12 M to 12.5 M, a 4% rise. Ths research paper by Barnabe Monnot, an independent researcher, attempts to study the effect of the change on the network and by extension estimating Ethereum and Bitcoin’s elasticity demand.

The Elasticity of Bitcoin and Ethereum

The price elasticity of demand (PED) is an economic ratio used to measure the effect of changes in demand for a product based on the change in its price. According to the research, the value for Bitcoin and Ethereum is 0.4-0.6 and 1-2 respectively. The PED for Bitcoin suggests that the demand is less sensitive to the increase in fees.

On the other hand, Ethereum’s demand is proportional to its demand. Vitalik Buterin, the co-creator of Ethereum seemed to confirm the analysis. He cites from his own research on elasticity demand which confirms the ratio value at approx 1. A unit elastic demand implies that the demand for the product will move proportionately with the price change. Monnot notes,

Ethereum’s demand is more elastic likely because there is a wider array of applications that can be developed on Ethereum, with different costs per unit gas.

ethereum gap limit
The effect on Increasing GAS Limit on Demand (Source)

Hence, from the vast array, some categories of applications chose to quit which cannot sustain the high GAS fees. Nevertheless, based on the percentage increase in GAS limit and unit elasticity observation, Buterin notes,

If the elasticity is 1 then of course a 4% rise in gaslimit will have a negligible effect on an already super-volatile gasprice!

The oscillation in the gas price chart confirms Buterin’s hypothesis. On a positive note, it has increased the gap usage without the increase in the price.

The Pending Decision on Mining Fees and Rewards

Nevertheless, the transaction fees on Ethereum is increasing substantially now; climbing up exponentially past 2019 high.

bitcoin charting techniques
Bitcoin [BTC] Charting Techniques (Source)
This could motivate the developers and users of the chain to jump ship and move to a cheaper platform. Moreover, it is also threatening the security of Ethereum. Vitalik Buterin himself tweeted last week,

According to his prior research, block rewards are essential for the security of the network and could possibly hurt Bitcoin in the future as well. Moreover, with scaling solutions are nearly a year away, there is uncertainty around the continued rate of development of Ethereum.

Do you think the transaction fee dilemma will shape the crypto bull run? Please share your views with us. 


The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
About Author
Nivesh Rustgi
1181 Articles
Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)

Loading Next Story