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09 July 2020

Ethereum daily transaction fees continue to outpace Bitcoin

A little over a month ago, Ethereum daily transaction fees surpassed those of Bitcoin. While it wasn’t the first time, this fee “flippening” appeared more utility-driven and sustainable as Ethereum-based volumes for stablecoin transfers and decentralized exchanges were on the rise.

This indication turned out to be correct. DeFi activity has exploded, partly driven by the fervor around “liquidity mining” and recent application upgrades (Uniswap v2, Kyber Katalyst). In response, total daily fees on Ethereum have remained above Bitcoin’s for over a month, the longest such period in its five-year existence.

Click here to see the interactive chart

Onlookers should caveat this increase in daily fees paid with the fact Ethereum miners upped the gas limit in late June, thereby raising the ceiling on potential fee-bearing transactions allowed per block. More transactions processed each day should inevitably lead to a larger fee total. But the consistent uptrend is a clear sign that the demand for Ethereum block space is not slowing down.

Why it matters: - Transaction fees aren’t only an indicator of on-chain activity; they also contribute to a blockchain’s security budget. As Ethereum transitions to a Proof-of-Stake (PoS) network, it will need to keep miners happy and their pockets full until the new chain is ready. In the meantime, a bump in revenue from increasing transaction fees should help keep miners engaged. - It’s not all roses at the moment. Rising costs per transaction can pose a UX problem and ward off new users. All eyes will be on the adoption of recently launched Layer-2 scaling solutions like OMG Network, Matic Network, and the various rollup iterations to alleviate an increase in fee price. OMG Network has already partnered with Tether, a notorious Ethereum gas guzzler, and Loopring’s new offerings and DeversiFi (using Stakware’s latest software) are showing some early promise.

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