- Ethereum, the second-largest cryptocurrency by market capitalization, has experienced a significant increase in gas fees, rising by nearly 500% in the last two weeks.
- Increased on-chain activity has been driven mainly by higher DEX volumes, rising Ether transfers, and increased leverage on lending platform like Aave.
Ethereum, the second-largest cryptocurrency by market cap has witnessed its gas fees surge by nearly 500% over the past two weeks. A report from Coinbase additionally revealed that this surge has been highway driven by an increase in on-chain activity.
Users and investors were struck dumb when gas fees significantly saw a rise, especially between September 16 and 26. The median transaction cost, which was $0.09 at the start of September, shot up to $1.69 within this short span, reflecting a dramatic increase in network congestion.
Gas fees basically represent the charges Ethereum users pay to ensure their transactions get included in the next block by network validators. Validators prioritize transactions with higher fees, leading to significant fees on popular tokens, sometimes reaching thousands of dollars.
Picking up on the trend, Coinbase analysts David Duong and David Hang shed light on the matter stating that “There has been no single driver of increased activity.” Instead, this spike has been attributed to several factors including the increased volume of decentralized exchanges (DEXs). While DEX volumes saw a modest 9% increase week-over-week, this growth still contributed to the overall strain on the network
Additionally, another factor that has led to the surge in block demand is the increase in USDC deposit rates on the lending platform AAVE, recording a rise from 3.5% to 4.5%. Also, Ether transfer volumes saw a notable 17% week-on-week increase, further straining the network and driving up gas fees.
Gas Fees Surge
The uptick in gas fees, as observed by Gashawk, is a clear indicator of increased on-chain activity. According to data from blockchain efficiency firm Gashawk, gas fees surged to as high as 40 gwei multiple times in the last week before dropping back to lower levels. These fluctuations indicate increased and inconsistent on-chain activity, reflecting the dynamic nature of Ethereum’s decentralized ecosystem.
Gwei is a tiny unit of Ethereum (ETH), equivalent to one billionth of an ETH.
Notably, the rise in gas fees has also resulted in a significant increase in Ether burned through the network’s fee-burning mechanism. According to data from CryptoQuant between September 14 and 24, total Ether fees burned daily spiked by over 900%, with 2,097 ETH being burned during this time.
This burn mechanism, introduced by Ethereum’s EIP-1559 upgrade, effectively reduces the circulating supply of Ether whenever transactions are processed, adding deflationary pressure on the asset.
Also contributing to the network’s demand, DApps on Ethereum saw a surge in activity. Data from DappRadar shows that DApp volumes nearly doubled, with a 97% increase over the last 24 hours to $3.6 billion. Similarly, non-fungible token (NFT) volumes have risen by 17%, further reinforcing the increased on-chain activity.
Meanwhile, at the time of writing, ETH is changing hands with $2,642.05 marking a 0.20% surge in the last 24 hours.
