I put my money, exactly where my mouth is.
That is why immediately after expressing my disgust for the high fees on Ethereum in a Publish0x post, I switched to BSC 100%.
In this post, I will further expound on why it’s no longer profitable for me to continue using Ethereum, for decentralized trading and yield farming.
And why the Binance Smart Chain (BSC) was a better choice by all standards.
The problems with Ethereum
- High gas fees
- Scalability issues
- Low transaction throughput
- Unlimited supply
But for me, the only issue was the fees.
The others are inconsequential to me, as they’re being worked on.
My continued use of Ethereum DEXs and farming was no longer making any economic sense.
And that’s the only problem I’m going to talk about in this post.
Fees, fees, and more fees
Most cryptocurrencies are NOT free to send from one wallet to another.
This is normal. As the transaction fees are used to pay miners and validators for securing the network.
When the network is normal, these fees are usually in cents or a dollar and a few cents.
However, during peak periods, the fees can fluctuate significantly.
And one will be required to pay higher fees to get faster transaction confirmations.
Again this is somewhat standard among all cryptocurrencies.
But the worst offenders are Ethereum and big daddy Bitcoin.
Since the beginning of 2020, Ethereum has benched even Bitcoin in transaction fees.
And this robbery they call fee has not just been sustained but keeps getting crazier.
Interacting with Ethereum DEXs and smart contracts
This is where things start getting very shitty.
The fees charged for transacting on DEXs are 3 to 4 times the normal wallet to wallet transaction fees.
It doesn’t stop there.
It takes several steps to place a trade on decentralized exchanges.
Each of these steps costs fees.
And each of these fees is higher than a normal wallet-to-wallet transaction fee.
- You pay a special fee if you’re trading a particular token for the first time on the exchange.
- And another transaction fee to swap tokens on the exchange.
- You also pay a fee to add liquidity on the exchange.
- And yet another fee to remove the liquidity from the exchange.
Illustration of the different fees on decentralized exchanges
To put these fees in perspective, let me illustrate with an example.
Wallet to wallet transaction fees
You moved $2500 worth of Ethereum into your Ethereum wallet.
You’re charged between $1 to $5 for this transaction depending on where you’re moving it from.
During high network usage, this amount could be much higher.
Your goal is to provide liquidity in a pool.
Grab your liquidity provider (LP) token and use it to farm another token on a different platform.
This is where it starts getting too interesting.
Verification and exchange fees
Your $2500 needs to be split into two equal half between Ethereum and the other token you want to provide liquidity for.
So you place a buy order for the other token.
But before you can buy that token you need to verify it.
This, of course, costs a small fee of maybe $2 to $4.
Once you pass that verification stage you can now buy the token and get charged a transaction fee of between $3 to $17.
It could be higher depending on the state of the network.
But let’s be very conservative.
Ok. You have successfully bought your token. What’s next?
Liquidity provider and withdrawal fees
You now need to provide liquidity in the pool.
You’re charged another fee of between $3 to $8.
Congratulations you’re done, right?
Remember your goal was to provide liquidity and use your LP to farm another token on some other place.
LP staking fees
So you go to that other platform and start a stake LP transaction.
Hopefully, this takes only one step and you pay a small fee of say $3 to $7.
Congratulations you’re done now.
And you have paid between $25 to $50 in transaction fees.
Which is about 1 to 2% of your $2500 capital.
The situation is worse when you’re trading with a lesser amount.
So, imagine the small guy trying to trade or farm with $50 to $500.
You have no chance of ever making a profit.
If the market does not dip to wipe you off the ground.
And impermanent loss does not wreak havoc on you.
The fees will add up to make make your efforts fruitless.
That doesn’t sound like a way to be rich.
Is Binance Smart Chain better?
Ethereum is one of the three coins in my “sure bag”.
So, I believe in the future of the cryptocurrency.
But there’s a better alternative for my trading and farming needs.
And that’s Binance Smart Chain (BSC).
What is Binance Smart Chain
Binance Smart Chain is a smart contracts blockchain that allows anyone to develop high-performance decentralized applications (dApps).
What makes BSC appealing?
1. Compatible with Ethereum
BSC does not just empower developers to build dApps on its blockchain.
It is also compatible with Ethereum.
That means you can use your Ethereum wallet on BSC with a simple configuation.
You can also move an Ethereum-based dApp to BSC without losing anything.
2. Extremely low fees
And the fees are extremely low.
Using the earlier transaction example.
If it were on BSC, the most you will pay for all the processes of trading, providing liquidity and staking your LP will be around $1.5 to $2.
No! not $2 for a single transaction.
I mean all the transactions which cost up to $50 on Ethereum will cost you $2 to $3 max on BSC.
And that’s not all.
3. Offers the highest returns
There’s no yield farm on Ethereum that match the level of returns we enjoy on BSC DEXs.
I am talking about returns such as 0.59% daily APR to as high as 2% daily APR.
Though some of these returns are for a limited time.
But there’re farms such as the CAKE farm, that have very high APR that’s been sustained for months.
In summary, the Binance Smart Chain provides you with:
- Extremely low fees
- Faster transaction speed (2 to 10 seconds)
- Greater returns
- Zero failed transactions
I am currently using only the PancakeSwap and highly recommend it.
Have you switched to BSC yet? What’s been your experience so far? Share with us in the comments section below.