In recent months, there has been an alarming rise in Ethereum gas fees or transaction fees on the blockchain. This spike is mainly due to the bots or automated algorithms that are spending millions of dollars to frontrun punters of PEPE, CHAD, and other popular ERC-20 tokens. This phenomenon is causing significant damage to the Ethereum network and slowing down transaction times for regular users.
Frontrunning occurs when a party uses their speed advantage to place a trade or order ahead of their competitors in the market. In the world of Ethereum trading, frontrunning is achieved by placing a transaction ahead of a popular order, profiting from the arbitrage created by the price differences.
PEPE and CHAD are two names that have become increasingly popular in the Ethereum community. These tokens have been on the platform for a while now but recently gained significant momentum when the mainstream media started mentioning them.
PEPE is a digital asset based on the popular internet meme character Pepe the Frog, while CHAD is a token that is meant to represent the alpha male archetype. The value of these tokens is meant to fluctuate based on the sentiment of the community surrounding them.
However, the rise in popularity of these tokens has also attracted the attention of bots that are programmed to look for orders related to these coins. These bots are using ethereal wallets to buy the tokens before the orders come in and then sell them at a higher price following the significant anticipated price increase.
The effect has been a surge in gas fees on the Ethereum network, as these bots with deep pockets are willing to pay exorbitant amounts of transaction fees to have their trades confirmed ahead of regular users.
The increased congestion within the Ethereum network has made it challenging for small traders who typically engage in day trading on the platform. They are being priced out of the market and forced to wait for long periods to have their transactions confirmed. This situation is resulting in a less-trusting community, with many becoming frustrated with the high transaction costs and slow processing times.
The Ethereum network has also been put under increased pressure, with the miners prioritizing the transactions with the highest gas fees. These miners are happy to profit from the current situation themselves and allow bots to dominate the network. The network is failing to deliver an equal platform for all users, making it harder to find good investing opportunities.
The risk inherent in assuming that the prices of these tokens may take off after they gain significant social media attention has attracted a lot of attention from casual investors. They are participating in the trend and creating more order books for bots to front-run. This situation has increased the networks congestion as the bots compete against each other for profits, pricing out regular users.
Moreover, the bots that are dominating the network are programmed to execute trades in milliseconds, significantly faster than human traders. This technology-enabled advantage of bots is resulting in greater inefficiencies and friction within the decentralized finance system. The Ethereum network is supposed to be trustless and equal but is now being dominated by bots that are stealing opportunities from regular users.
In conclusion, the current situation on the Ethereum network does not bode well for small traders and investors. The rise in gas fees is creating significant challenges that the network is currently struggling to manage. Regular users are increasingly finding themselves priced out of the market, with bots dominating the system.
Greater action needs to be taken by regulators, exchanges, and platform providers to ensure that equal opportunities are available for all participants in the decentralized finance system. Those who do decide to take part in trading PEPE, CHAD, and other popular ERC-20 tokens must keep their wits about them and remember that these tokens are often associated with significant volatility.
Investing in the cryptocurrency market will always carry an inherent risk, but the use of bots that dominate the system is making it even harder for regular users to navigate. Ultimately the Ethereum network and other decentralized finance systems need to address the imbalance that currently exists, and it is up to the community to work collaboratively to ensure this is achieved.