What are the best ways to deal with network congestion and high transaction fees on blockchain?

?? Dealing with Blockchain Network Congestion & High Fees ?? Blockchain technology is transformative, but network congestion and high transaction fees can be challenging. Here are some effective strategies to tackle these issues: Layer 2 Solutions: Utilize Layer 2 protocols like Lightning Network or Polygon to process transactions off-chain, reducing congestion. ? Sharding: Implement sharding to split the blockchain into smaller, manageable parts, increasing throughput. ?? Optimized Fees: Use wallets that allow custom fee settings to optimize transaction costs. ?? Off-Peak Transactions: Time your transactions during periods of low network activity to avoid high fees. ?

Selecting the right blockchain network is paramount. For instance, in supply chain management, where rapid, cost-effective transactions are crucial, a network like Stellar can be ideal. Meanwhile, for decentralized applications demanding advanced smart contract capabilities, Ethereum or Cardano may better suit your needs, despite higher fees. Prioritising functionality aligns your blockchain experience with your specific objectives.

How this could be applied to the real world: ?A company that wants to use blockchain to track the supply chain of its products might choose a blockchain with high throughput and low fees, such as Bitcoin Cash or Litecoin. ?A government that wants to use blockchain to create a tamper-proof voting system might choose a blockchain with high security and decentralization, such as Ethereum or Cardano. ?A developer who wants to create a decentralized application might choose a blockchain that is designed to be scalable, such as Ethereum.

It is important to note that the best blockchain for a specific use case may change over time. As new blockchains are developed and existing blockchains are improved, the relative advantages and disadvantages of each blockchain will change. It is therefore important to keep up-to-date with the latest developments in the blockchain space in order to make the best choice for a specific use case.

A side from choosing the right network, you also have to take into consideration a few other key points: Which programming language your team is going to be able to handle? Is the network EVM for future cross chain interoperability? Are there layer 2 solutions to enhance the selected network scalability if needed? And, having the network with the most developed ecosystem for your product (ex: Ethereum for DeFi or Solana for NFT) can help you grow faster by leveraging synergies between projects!

An example I've observed is in DeFi. In high-demand scenarios, adjusting gas price and limit is crucial. For instance, during a decentralized exchange (DEX) trade on Ethereum, setting a higher gas price ensures faster execution, vital for arbitrage opportunities. Conversely, when less urgency exists, lower gas prices conserve transaction costs, ideal for routine token transfers or interactions with smart contracts. Utilizing tools like ETH Gas Station or Metamask empowers users to make these real-time adjustments, optimizing their blockchain experience based on transaction priorities.

Suppose you want to send a transaction to a friend to pay them for something. You can use a gas price tracker like ETH Gas Station to see what the current gas prices are. You see that the average gas price is 100 Gwei, but there is a range of gas prices from 50 Gwei to 200 Gwei. You decide that you are willing to pay a bit more for a faster transaction, so you set your gas price to 150 Gwei. You also use a gas limit estimator like Etherscan to estimate the gas limit for your transaction. You see that the estimated gas limit is 21,000 gas. You then send your transaction with a gas price of 150 Gwei and a gas limit of 21,000 gas. Your transaction is likely to be processed within a few minutes, and you will pay a fee of around 30 USD.

From my experience, embracing Layer 2 solutions can be a game-changer. In the gaming industry, for instance, where rapid microtransactions are essential, state channels can facilitate lightning-fast in-game purchases without burdening the main chain. Meanwhile, in supply chain applications, utilising rollups can efficiently track and verify product movements on a Layer 2 chain, reducing congestion and minimizing costs. Layer 2 solutions offer a practical path to enhance blockchain efficiency and user experience across various domains.

Two approaches to address these issues are optimizing the Mainnet and exploring L2 solutions and sharding as they can improve scalability. Optimizing block size and intervals, implementing a market-based system, and opting for cryptocurrencies can also enhance transaction efficiency. Additionally, improving network performance can be achieved through bundling, regular upgrades, dynamic adjustments, and interoperability solutions. Techniques like SegWit offer advantages in tackling these challenges.

A layer 2 solution called Loopring can be used to improve the speed and cost of transactions on DEXs. Loopring uses a technique called zkRollups to bundle transactions together and verify them on the Ethereum main chain. This allows Loopring to process transactions much faster and cheaper than Ethereum itself. For example, a user on a DEX that uses Loopring could trade cryptocurrencies with another user in a matter of seconds and pay a fee of just a few cents. This is much faster and cheaper than trading on a DEX that uses the Ethereum main chain directly. Layer 2 solutions like Loopring are still in their early stages of development, but they have the potential to revolutionize the way that blockchain transactions are processed.

Some chains offer 2 layer solutions, which can be an alternative, but it ends up not being something that is easy to understand for a beginner and can generate resistance. Personally, I end up being very biased in thinking about users who don't yet use the network, so everything that generates resistance ends up falling in priority. But it's worth looking at Polygon, Arbitrum, Optimism to better understand this alternative.

Suppose you are a liquidity provider on Uniswap. You need to make a number of small trades to rebalance your portfolio. However, you can use Uniswap's batching feature to combine all of your trades into one transaction. This will reduce the number of transactions and the gas fees that you need to pay. For example, if you need to make 10 trades, you would normally have to pay 10 gas fees. However, if you use Uniswap's batching feature, you can combine all 10 trades into one transaction and only pay one gas fee.

Aggregation can also be used to reduce the cost and speed of blockchain transactions. For example, 1inch is a decentralized exchange aggregator that allows users to combine their trades across multiple exchanges. This can help users to get the best possible price for their trades and to save on fees. For example, if you want to trade ETH for DAI, you could use 1inch to aggregate your trades across multiple exchanges. This would allow you to get the best possible price for your trade and to save on fees.

One practical example is in decentralised exchanges (DEXs). When users frequently swap tokens, batching and aggregation can optimize the process. Instead of sending each trade separately, platforms like Uniswap allow users to bundle multiple transactions into a single, cost-effective transaction. This significantly cuts down on gas fees and execution time, making decentralised trading more efficient and affordable. Utilising these techniques in high-volume trading scenarios can enhance the overall DEX experience.

Adopting alternative payment methods can revolutionise blockchain payments. In e-commerce, for instance, where fast and affordable transactions are essential, payment channels like the Lightning Network have proven invaluable. They enable microtransactions with minimal fees and near-instant confirmations, enhancing the user experience. Moreover, stablecoins like USDC offer stability and lower fees, making them an attractive choice for cross-border payments and online purchases. These alternatives empower businesses and individuals to navigate the blockchain landscape more efficiently and cost-effectively.

you could use a Lightning Network wallet to send your friend 0.01 BTC. The payment would be confirmed within seconds, and you would only pay a small fee. Alternatively, you could use a stablecoin, such as USDT, to send the payment on the main chain. This would avoid the volatility of Bitcoin, and you would only pay a small fee. For example, you could use a stablecoin wallet to send your friend 10 USDT. The payment would be confirmed within minutes, and you would only pay a small fee. By using alternative payment methods, you can reduce the cost and speed of blockchain transactions for payments. This can be especially beneficial for international payments, where fees can be high and confirmation times can be slow.

Another very simple way is to use a centralized exchanges. Inside the brokers, they end up having much cheaper rates and less vulnerable to the fluctuations that the chain may present, which would make the transaction much cheaper. And because some brands in this segment have a high reach, the user can feel more confident in using it.

Bitcoin Cash was created as a fork of the Bitcoin blockchain in order to address the issue of high transaction fees on the Bitcoin blockchain. Bitcoin Cash has a larger block size than Bitcoin, which allows it to process more transactions per second. This has helped to reduce transaction fees on the Bitcoin Cash blockchain.