Ethereum Market Update: Vitalik Buterin explains high ETH fees

Ethereum (ETH) hit the multi-year high at $488 on September 1 and retreated to $461 by press time. The second-largest digital asset has lost over 1.2% since the start of the day. However, it is still in a green zone if compared to this time on Monday. ETH/USD has been moving in sync with the market, which has started a downside correction after a sharp rally of recent days. Ethereum happens to be one of the main beneficiaries of the rally with over 22% of gains on a week-on-week basis. 

ETH/USD 1-hour chart

High fees blues

As FXStreet previously reported, ETH gas prices also known as transaction fees had been skyrocketing lately amid DeFi boom. As the growing transaction fees imply that the network is overloaded, some community members come up with ideas to reduce the fees. I the latest Tweet thread, Ethereum creator, Vitalik Buterin, lectured the community on how things work and why their solutions would do no good.

After explaining some basic economic ideas, he concluded that scalability is the only meaningful way to deal with the high transaction fees issue.

Conclusion: the only solution to high tx fees is scaling. Tether, Gitcoin and other apps are doing the right thing by migrating to ZK rollups today. I'm excited about the soon-upcoming optimistic rollups that will generalize rollup scaling to full EVM contracts.

ETH options open interest on fire

In a separate development, the cryptocurrency research service Skew reported that Ethereum options open interest new all-time-high, which confirms the growing interest and high trading activity of ETH. 

The options contract gives an investor a right (but not an obligation) to buy or sell the underlying asset at a certain day in the future at a certain price specified in the contract. The nature of those financial vehicles allows traders to bet on both upside and downside price movements without actually buying or selling the asset itself.

Considering that all options contracts are just an agreement to buy or sell the asset, the open interest reflects the aggregated amount of all open contracts irrespective the direction. It means we do not know, whether those people are bulls or bears. While the information on open options interest cannot be regarded as a reliable price indicator, it helps to assess the market liquidity and overall trading activity.