Ethereum Suffers from Fundamentals Flaws — Is it the New Normal?
- Markets remain bullish, especially Ethereum, despite the second-largest network continuing to suffer from the fundamental flaws — insanely high fees and clogged up the network.
- Despite the rising fees, hitting ATH in both USD and ETH terms, ETH price is uptrending, reflecting people’s preference for Ether.
The fees on Ethereum had reached the highest since 2015 when it launched, surging past $7. More than 17,500, $6.8 million are currently being spent on fees daily on the network. Spencer Bogart, general partner at Blockchain Capital,
“Mempools are getting more competitive as value at stake for pending crypto tax increases. This increased competitiveness is a byproduct of increasing adoption and utility and likely part of a new normal.”
🚨 Mempool Congestion Alert 🚨
We are seeing sustained high rates of transaction eviction over the past several days.
— Blocknative (@blocknative) August 13, 2020
Soaring transaction fees means the daily profit of Ethereum miners is now at its highest point in 27 months. As per Bitinfocharts, the daily profitability of Ethereum miner operators is at $5.8 per 100 megahashes second (MH/s) of computing power — a level last seen in early May 2018.
Who Exactly is Responsible for Soaring Ethereum’s Fees?
No doubt, this spike in fees is caused by a high demand for space on-chain, with the median gas price at its all-time high of 217 Gwei and mean gas price even higher at 224 Gwei.
But users need to pay far more than the media gas to use the network effectively, and Etherscan is recommending gas price of over 350 Gwei for a 20 second wait time.
The reason is simple, “the anticipation of a bull market has created massive demand in all niches – large and small, familiar and arcane, dated and nascent,” notes Glassnode.
One reason for this massive demand for transactions on Ethereum is stablecoins, especially USDT, which is the second biggest gas guzzler, as per Etherscan.
In August, USDT transfers accounted for 14% of all fees spent, while other stablecoins account for just 1.2% of fees spent.
But the most significant gas guzzler belongs to the “other contracts” category, which accounts for more than 65% of all gas spent this month. This category covers DeFi, DEXs, and arbitrage bots.
Uniswap is the most significant contributor to Ethereum’s gas price spike, which is responsible for 39% of fees spent by the top 20 contracts this month.
Among these 20 contracts, arbitrage bots make up for almost 20% of fees, spending $2.5 million worth of ETH in gas.
Ponzi schemes also continue to be high fee payers, which takes the place of 2nd (Forsage.io) and 19th (Lionsshare.io) in most gas-intensive contracts this month so far, stated Glassnode in its report.