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Ethereum’s Failed Transactions Result in Major User Losses — What’s Going On?

Ethereum’s network of decentralized applications and smart contracts often comes under scrutiny for its elevated rate of unsuccessful transactions, causing significant losses for its users. According to data shared on November 7 by Fernando Nikolić, who serves as the Marketing and Communications Director at Blockstream, Ethereum users have incurred losses exceeding $100,000 in just the top 10 failed transactions on the network.

The High Costs of Failed Transactions on Ethereum

These substantial losses were disclosed in a post on Nikolić’s X (formerly Twitter), where he characterized the unsuccessful Ethereum transactions as “hot garbage.” The most significant failed transaction resulted in a staggering loss of more than $38,000 in gas fees for a single user, while the second-highest failure incurred a loss of over $17,000 in gas fees. The remaining failures in the top 10 list also depicted users losing thousands of dollars in gas fees.

Within Ethereum’s framework, gas fees paid for transactions are non-refundable, regardless of whether the transactions ultimately succeed or fail. This means that when transactions fail on the Ethereum network, any gas fees paid are irretrievably lost.

Nikolić’s data brings attention to the issue of losses stemming from transaction failures, a concern that became particularly prominent during a surge in Ethereum activity in May, driven by the meme coin PEPE. Increased network congestion during such spikes typically corresponds to a significant rise in gas fees. Some users may find themselves with insufficient gas to complete their intended transactions, leading to a prevalence of transaction failures.

The Ethereum Criticism Continues

Nikolić’s pointed critique of Ethereum aligns with recent censures from other Bitcoin advocates. Bit Paine, another proponent of Bitcoin, went so far as to label Ethereum as a scam just last week. His argument centered on the assertion that the Ethereum network had facilitated the creation of numerous “digital penny stocks” in the form of tokens he considers unregistered securities.

While both critics share a maximalist perspective favoring Bitcoin, their scrutiny draws attention to some of Ethereum’s key challenges, particularly in the realms of failed transactions and concerns about proper token registration. Despite these drawbacks, Ethereum maintains its position as the second-largest blockchain network after Bitcoin, with a valuation exceeding $226 billion as of the latest information.

Nevertheless, the losses suffered by users due to the network’s inherent limitations present a significant concern that the Ethereum community cannot afford to overlook. As activity surges again, akin to the meme coin mania observed in May, the recurrence of losses from failed transactions appears likely. In light of this, developers and researchers guiding Ethereum’s roadmap may need to prioritize solutions addressing the transaction failure rate to mitigate avoidable losses.

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