Ethereum Transaction Fees Exceed Block Rewards, Network Utilization Stands at 96%
For the first time in Ethereum’s history, miners earned a record 30,500 ETH on Aug 12 as revenue from transaction fees – at 17,000 ETH ($6.87 million), exceeded block rewards — which stood at 13,500 ETH.
DeFi and DEXes Activities on the Rise
The spike in transaction fees saw the previous record posted during the crypto mania of 2017 surpassed as Ethereum continues to draw more demand thanks in part to the DeFi. On Aug 12, the average gas cost was 223 Gwei according to Etherscan.
Ethereum is the most active smart contract platform and the home of open finance, or DeFi. Proponents assert that open finance will eventually democratize finance enabling investors to permanently cut off the middleman and earn superior yields from their digital assets.
The snowballing of Ethereum’s DeFi dApps is largely attributed to the rise of transaction fees and Gas costs, forcing miners on several occasions to raise the total gas limit to 12.5 million per block.
But other than yield farming and the race to harvest profits by taking advantage of arbitrage on different lending dApps, the spike in the average transaction fees on Ethereum also coincides with renewed activity in Uniswap, the largest decentralized exchange in Ethereum.
Positioning for Higher ROI
For comparison, the cumulative trading volumes in Uniswap mid-way in August stands at $1.76 billion, surpassing July’s. This points to a possible paradigm shift as investors strategically flock to Ethereum DEXes while positioning themselves as early investors of several high potential projects like Decentr (DEC).
Besides Uniswap — which has no native currency, the performance of Ethereum-based DeFi tokens continues to sky-rocket amid news of supportive fundamentals. The inclusion of BNT, BAND, and several ERC-20 tokens in Coinbase’s exploratory list infused confidence and has seen them rally. BNT which primes the Bancor DEX most of whose activity lies on Ethereum, for instance, is up 10x since May 2020.
Average Ethereum Transaction Fees up 65X
Considering these developments and keeping in mind the positive correlation between network activity and transaction fees, it is only expected that transaction fees rise. From BitInfoCharts, the average transaction fee stood at $5.5, a 65X increase from Jan 1 when it was $0.0845 reflective of the high network utilization at over 96 percent on Aug 12.
Interestingly, even as Ethereum fees soar to ridiculous levels, users are unfazed as Ethereum transaction count continues to rise. This means there is a high level of demand and true utility in Ethereum, different from events of the crypto mania of 2017.
As Ethereum gas costs rise to untenable levels, developers are preparing for the Beacon Mainnet launch following the activation of the Medalla testnet.