Even as prices fall after a massive crash at the start of the month, Ethereum fees have remained high for a record period.
Ethereum transaction fees, paid to broadcast ETH transfers or to communicate with smart contracts on the Ethereum network, have stayed above two dollars on average for a full month as of August 10 – longer than any previous run above that level, according to data from BitInfoCharts.
During that time, the average transaction costs rose to $ 14.58 on September 2, before falling to $ 2.67 on September 9. Now rates are on the rise again, a sign that activity on the network is on the rise again, and DeFi mania is far from over.
Fees for Ethereum (as well as Bitcoin and other cryptocurrencies) are determined by network activity. Blockchain transactions are processed by miners with limited capacity. When trades are broadcast, miners can easily manage, transaction costs are rising.
This provides an incentive for miners to add more processing power in the form of higher fees, while theoretically also reducing the number of transactions broadcast by users unwilling to pay higher fees.
Ethereum’s transaction costs rose an average of 70% to $ 4.55 between September 8 and September 10. Ethereum’s price also rose during that period, but only by about 4%, to $ 363.36.
According to BitInfoCharts, the average transaction fee on Ethereum has only risen above two dollars twice before. The first time, in early 2018, Ethereum fees stayed above that threshold for just 10 days, between January 5 and January 15. The second time occurred in the summer of 2018, when Ethereum fees stayed above two dollars for seven days from July 1 to July 7.
Now the transaction volume is so great that average daily fees have not had a chance to fall below two dollars since August 10. And with the recent fee reversal declining before Sept. 8, the streak appears to be continuing.
The continued strong activity is powered by DeFi applications that are attracting billions to be used for lending and providing liquidity for token swaps on decentralized exchanges. Recent DeFi activity on Ethereum has been so strong, economic activity measured by the value of tokens moving through the network surpassed Bitcoin’s for the first time in years.
Ethereum prices may have fallen from recent spikes, but fee activity on the network suggests the excitement and money pouring into DeFi projects may not be complete yet.