Ethereum’s Failed Transactions Result in Major User Losses — What’s Going On?
Ethereum’s network of decentralized applications and smart contracts frequently faces criticism for its high rate of failed transactions, which result in substantial losses for users. According to November 7 data shared by Fernando Nikolić, the Marketing and Communications Director at Blockstream, Ethereum users have lost over $100,000 in just the top 10 failed transactions on the network.
The High Costs of Failed Transactions on Ethereum
The staggering losses were revealed in a post on Nikolić’s X (formerly Twitter), where he referred to the failed Ethereum transactions as “hot garbage.” The top failed transaction resulted in a loss of more than $38,000 in gas fees for a single user. The second-highest failed transaction led to a loss of over $17,000 in gas fees. The remaining failures in the top 10 list also showed users losing thousands in gas fees.
Throughout this year, Ethereum has seen upwards of $100,000 lost due to failed transactions, with a single failed transaction costing a user $38,000+
What kind of hot garbage is this? pic.twitter.com/i8fA7IPOf9
— Fernando Nikolić 🇦🇷 🟠 (@basedlayer) November 7, 2023
Under Ethereum’s structure, gas fees paid for transactions are non-refundable regardless of whether the transactions succeed or fail. This means that when transactions fail on Ethereum’s network, any gas fees paid are lost permanently.
Nikolić’s data draws attention to the losses from transaction failures at a time when traffic on Ethereum spiked in May during a surge in activity around the meme coin PEPE. Increased congestion on the network tends to correlate with a dramatic increase in gas fees. Some users can fall short of having enough gas to process their attempted transactions, leading to rampant failures.
The Ethereum Criticism Continues
Nikolić’s harsh criticism of Ethereum follows similar condemnation by other Bitcoin proponents recently. Bit Paine, another Bitcoin advocate, referred to Ethereum as a scam just last week. He argued that the network had facilitated the creation of numerous “digital penny stocks” in the form of tokens he deems unregistered securities.
A brief history of the rise and fall of ethereum:
Guy tries to scam people with “quantum computer emulator.” Rightly fails.
Moves on to next scam: “world computer” – would have failed except…
It turns out to have one *very potent* use case: a platform for easily creating and…
— Bit Paine ⚡️ (@BitPaine) November 4, 2023
While the two critics come from a similar maximalist perspective favoring Bitcoin, their scrutiny spotlights some of Ethereum’s main struggles – failed transactions and questions around proper token registration. Despite the drawbacks, Ethereum is still the second-largest blockchain network behind Bitcoin, valued at over $226 billion as of writing.
Nonetheless, the users losing thousands due to the network’s structural limitations present a pain point the Ethereum community cannot ignore. As activity spikes again, similar to last May’s meme coin mania, the losses from failed transactions will likely plague the network again soon. The developers and researchers behind Ethereum’s roadmap may need to prioritize solutions to the transaction failure rate to avoid preventable losses.
