On September 2, Ethereum (ETH) miners’ income reached a permanent high of 51,541 ETH. While this can be useful for miners, it can turn popular DeFi projects into a mousetrap.
When these numbers are expressed in US dollars, they are still below the record set on January 10, 2018, when miners earned $ 32 million versus $ 23 million on September 2. The price of ETH at the time was about three times the price. Today. Most importantly, in 2018, only 12% of revenue came from transaction fees – up from 74% yesterday.
Demand for the network has reached its highest level since its launch in 2015. The amount of gas used is twice as high and the gas price is five times higher than at the peak of 2018. This new network load is the result of the DeFi boom; The biggest cryptocurrency trend in 2020.
The total value of DeFi has grown from less than $ 1 billion at the beginning of the year to nearly $ 10 billion today. This translates into the highest average transaction fees ever recorded at over $ 14.
While the $ 15 transaction fee might sound great, it doesn’t tell the whole story. The main thing here is that this is the average price. There is a difference in transaction fees on the Ethereum network where the price you end up paying depends on the type of transaction, with some transactions requiring significantly more fuel than others. For example, while a simple ETH conversion at the time of writing may require a fee of just over $ 4, there is a $ 180 fee for exchanging tokens through the DEX compiler. Since then, many DeFi-related transactions have shown an upward trend.
This creates a situation where DeFi is no longer available to retail investors, as transaction fees can outweigh potential profits. It could also pose a bigger problem – retail investors who have already placed their assets on DeFi apps may not be able to withdraw funds without significant losses. The higher the commission, the higher the DeFi mousetrap.
It also places limits on the potential growth of DeFi on Ethereum. The higher this fee, the higher the entrance fee to DeFi. Ultimately, this could turn the DeFi ecosystem into a playground for money and whales.
The cost of transaction fees on the Ethereum network depends on the market or supply and demand. The only caveat is that, unlike most market economies, network performance is static and therefore cannot keep up with growing demand, resulting in a constant rise in gasoline prices. However, this trend cannot continue indefinitely and is likely to reverse at some point.