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ETH miners’ earnings hit new all-time highs, which may be bad news for DeFi retail participants

September 4, 2020

September 2nd Ethereum (ETH) miners’ earnings hit an all-time high of 51,541 ETH. While this can be good for miners, It could turn popular DeFi projects into a mousetrap.

Ethereum mining income, percentage of fees, and total gas usage. Source: Glass knot.

In USD, those numbers are still below the January 10, 2018 record when the miners made $ 32 million versus $ 23 million on September 2. The price of ETH at that time was about three times as high as the current price. Most importantly, only 12% of revenue came from transaction fees in 2018. yesterday that metric was 74%.

ETH miners’ earnings hit new all-time highs, which may be bad news for DeFi retail participantsETH miners’ earnings hit new all-time highs, which may be bad news for DeFi retail participants

Ethereum mining income in ETH, USD and percentage of fees. Source: Glass knot.

The demand for the network is at its highest level since it was founded in 2015. The amount of gas used is twice as high and the gas price is five times as high as during the peak in 2018. This new stress app on the net it is created by the DeFi boom; the biggest crypto trend of 2020.

Total consumption of Ethereum gas and gas price. Source: Glass knot.

DeFi’s total value has grown from less than $ 1 billion at the beginning of the year to nearly $ 10 billion today. This has resulted in the highest average transaction fees ever. currently over $ 14.

Average Ethereum transaction fee. Source: BitcoinCharts.

While a $ 15 transaction fee sounds like a lot, it doesn’t show the whole picture. The key here is that this is an average price. The transaction fees on the Ethereum network vary as the price you ultimately pay depends on the type of transaction and some transactions require a lot more gas than others. While a simple ETH transfer can cost a little more than $ 4 at the time of writing, a token exchange through a DEX aggregator requires a fee of $ 180. Many DeFi-related transactions tend to be on the higher side.

This results in retail investors no longer being able to access DeFi as the transaction fees can far exceed your potential earnings. This can also be an even bigger problem: Retail investors who have already put their assets into DeFi applications may not be able to withdraw their money without incurring a significant loss. The higher the fees, the bigger the DeFi mousetrap gets.

This also limits the potential growth of the DeFi ecosystem on Ethereum. The higher these fees, the higher the DeFi ticket. This could eventually turn the DeFi ecosystem into an exclusive playground for soils and whales.

The cost of transaction fees on the Ethereum network depends on the market or supply and demand. The only limitation is that, unlike most market-driven economies, network throughput is fixed and therefore cannot adapt to growing demand, resulting in a steady rise in prices. of gas. However, this trend cannot continue indefinitely and is likely to reverse at some point.

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