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The hash rate of the Ethereum network has reached its highest level in 20 months with the rise in DeFi tokens

August 13, 2020

The new data from glassnode and Etherscan show this Ethereum’s hash rate has soared to a 20-month high, and this has led some bullish traders to point out that the price of Ether will continue to climb to new highs in 2020..

Ethereum’s explosive spike in hash rate appears to have been heavily influenced by the rapid growth of the decentralized financial sector (DeFi) and at the time of going to press it is around 201,000,000 GH / s, a value that has not been recorded since 2018.

The hashrate of the Ethereum network increases to the level of 2018

The hash rate of the Ethereum network has reached its highest level in 20 months with the rise in DeFi tokensThe hash rate of the Ethereum network has reached its highest level in 20 months with the rise in DeFi tokens

The hash rate of the Ethereum network increases to the level of 2018. Source: Etherscan.io

In recent weeks The demand for Ether has increased significantly, and since mid-June, more and more users have been using DeFi platforms, which led to the collapse of the Ethereum network.

As a result Transaction fees are approaching unprecedented levels due to the surge in transactions and increased activity on the DeFi and Uniswap platforms.

Is a higher hash rate good or bad for Ethereum?

An increased hash rate, increased ether price, and increased fees suggest that user activity on the Ethereum blockchain is increasing. Although the rise of Ethereum was mainly driven by DeFi, Data shows that Ethereum fundamentals have improved.

The hash rate of the Ethereum blockchain network has also increased as miners’ income from commissions has increased. In times of network congestion, users often compete with each other by charging higher gas costs or a transaction fee.

Competition in the market sometimes results in higher ratesespecially when interest in DeFi rises and miners’ incomes rise. An increase in revenue would then force more miners to mine on Ethereum, which would lead to an increase in the hash rate..

The Glassnode researchers explained that Miners’ revenue from Ethereum fees recently hit an all-time high of 18%. they said::

“Miners’ income from Ethereum fees has skyrocketed in the past two months, hitting an all-time high of around 18% (30d moving average). On the contrary, this has taken the multiple commission rate (FRM) to levels never seen before in Ethereum. The Multiple Commission Rate (FRM) compiled by Teo Leibowitz is defined as the ratio of total mining income to transaction fees. FRM tells how safe a chain is when the block rewards are gone. “

Miner income from fees and fee ratio multiple times

The miners’ income from commissions and the multiple commission rate. Source: Glass knot

Ether’s fees are higher than Bitcoin’s

In recent weeks The craze for Uniswap and new DeFi protocols like Yam Finance meant that Ethereum’s fees exceeded those of Bitcoin. Cryptowat.ch, a market data provider of the Kraken-Börse said::

“Ethereum’s on-chain transaction fees continue to exceed Bitcoin’s. The difference is now up to a million dollars a day. “

The on-chain fees for Ethereum surpass Bitcoin

Ethereum’s on-chain fees exceed Bitcoin’s. Source: Cryptowat.ch

Some critics may rightly argue this Higher fees on the Ethereum network have a negative impact on users and make the user experience more difficult.

An alternative interpretation suggests this Increased charges indicate that user activity on the network is increasing and, consequently, the hash rate is also increasing. These are healthy signs as in the darkest days of the 2018 bear market, many crypto investors criticized the lack of users for Ethereum-based dapps.

Also, As long as Ethereum remains a PoW (Proof of Work) blockchain network, the hash rate serves as an important metric for blockchain security.

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