Ethereum’s cumulative transaction fees so far this year are now over $350 million, more than double the aggregated total of the fees paid to transact on the Bitcoin blockchain.
According to a report published by Coin Metrics researchers and Nate Maddrey on how decentralized finance is fuelling Ethereum’s growth, new demand for Ethereum has seen transaction fees on the cryptocurrency’s network change “dramatically” as “high gas prices are becoming the new norm.”
Decentralized finance projects like Uniswap, SushiSwap, Yearn.Finance and Yam.Finance have reportedly contributed to the dramatic rise in network fees on Ethereum, with the trading of new tokens associated with these platforms – UNI, SUSHI, YFI, YAM – and of other DeFi projects, being mostly carried out on-chain via decentralized exchanges.
Coin Metrics’ report notes that trading on-chain created a fee market, as interactions with decentralized exchanges cost network fees, which can lead to “escalating transaction fees as users compete to be first in line for a trade.” The report states ETH’s median transaction fee hit a new all-time high earlier this month of $8.25, after SushiSwap’s SUSHI token was launched.
On Twitter, Coin Metrics showed how much Ethereum’s transaction fees surged with the rise of DeFi and surpassed those being paid on the Bitcoin network.
In comparison, the firm noted, at this time last year cumulative Bitcoin transaction fees were around $135 million, while Ethereum transaction fees were around $27 million. The rise in transaction fees has also led to increased revenue for ETH miners, so much so the network’s hashrate has increased exponentially.
It’s currently climbing towards new all-time highs, which is a “good sign for Ethereum, as network security is critical for the long-term health and success of the blockchain.” A higher hashrate means more computing power is being used to secure the network.
Coin Metrics’ researchers pointed out, however, that high gas fees can make the blockchain “prohibitively expensive” for some users, allowing whales to have more influence over the Ethereum network. It points out that ETH’s median transfer value has risen to “hundreds of dollars” since the rise of DeFi, showing the network is “shifting towards larger players.”
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