- Ethereum total transaction fees have surpassed Bitcoin’s fees
- The increased transaction fees is caused by the hype surrounding decentralized finance
- This is the first time Ethereum had more cumulative fees paid against Bitcoin
The hype and increased interest toward decentralized finance (DeFi) fueled Ethereum’s growth as well as its transaction fees so much that the network has finally surpassed Bitcoin’s total transaction fees.
Data from Coinmetrics suggests Ethereum’s cumulative transaction fees in 2020 stands at $350 million compared to Bitcoin’s $157 million. According to Cointelegraph, Ethereum surpassed Bitcoin’s fees around the same time Compound released its token called COMP.
This is the first time Ethereum had more cumulative fees paid against Bitcoin, which has generally dominated this category for years. Coinmetrics said that around the same time last year, Bitcoin transaction fees were $135 million while Ethereum transaction fees were $27 million.
One of the main reasons for Ethereum’s high transaction fees is the growing interest in decentralized finance. Cointelegraph noted how DeFi, yield farming, stablecoin transfers and even some Ponzi schemes make up a significant portion of Ethereum’s usage. It said there were days when revenue fees have actually exceeded bloc rewards.
DeFi is essentially a radical shift from centralized financial systems to peer-to-peer finance enabled by decentralized technologies like the Ethereum blockchain. Through smart contracts, DeFi advocates argue that there will be more financial security and transparency and it will also remove middlemen in transactions, which could effectively curtail cost.
The DeFi craze has resulted in numerous related projects whose tokens have rapidly increased in price within days. YFI, the governance protocol of Yearn.finance, increased to $43,768, an all-time high that even eclipsed the all-time high price of Bitcoins. UNI, the governance token of Uniswap, an automated market maker, was released with no prior announcement. Its users received 400 UNI, which, at one point was equivalent to $3,360 based on its all-time high price of $8.40 per UNI, on Sept. 18.
However, currently, it appears that DeFi tokens have lost their steam. By Sept. 9, most DeFi coins were down more than 50%, which effectively erased what they achieved the previous month in terms of value.