“To see similar levels of transaction fees paid, we have to go back to June 2020, before ‘DeFi Summer,'” Glassnode stated.
“Nobody goes there anymore—too it’s crowded,” Yogi Berra may have been referring to Ethereum.
The blockchain, which has faced competition from networks looking to exploit its high rates of congestion and double-digit transaction fees, has swung the other way.
According to a fresh report from Glassnode, miner earnings from transaction fees has decreased over 85% from 15,000 ETH per day just over a month ago. At 1,900 ETH, the seven-day average is presently. “To find similar levels of transaction fees paid, we have to go back to June 2020, before ‘DeFi Summer,'” the analytics firm noted.
That was also the month that DeFi lending protocol Compound released its COMP governance token, unofficially kicking off “DeFi Summer” and stoking demand for products that allowed people to lend, borrow, or swap assets directly with one another rather than going through a bank or other financial intermediary. Many DeFi protocols rely on Ethereum’s infrastructure, which increases the network’s popularity while simultaneously raising congestion.
Transaction fees rise in tandem with network demand. The greater the demand for transactions to be pushed through, whether it’s bids on an NFT or loans on Compound, the less room there is for more transactions to be included in a block. Transaction fees rise as a result. Fees decrease when more space becomes available.
Because DeFi activity has reduced, there is more room available. “The current month has seen a historically huge fall,” Glassnode said on June 7.
According to data from DeFi Pulse, $1-2 billion in value was moving around on Ethereum-based DeFi protocols in June. Today, the amount known as “total value locked” (TVL) has climbed to more than $50 billion. However, on May 11, just one day after Ethereum hit an all-time high exchange price of $4,165, TVL reached a high of $86 billion.
Following Ethereum’s drop below $2,000 over the weekend, the network’s miners—who process transactions in exchange for keeping the blocks they create plus fees—are being hammered by a double whammy of reduced fees and lower exchange rates.
According to BitInfoCharts, the average transaction cost on June 20 was $3.50, while it was $69.92 on May 12. Since January 1, when the price of a single ETH was $724, it had not been so low.
It might be large enough for people to return. If they do, and fees begin to climb again, it will be “like déjà vu all over again,” as Berra put it.