The Ethereum network has witnessed a remarkable surge in revenue due to a spike in memecoin trading activities. IntoTheBlock’s analysis revealed that the network’s transaction fee income soared to unprecedented levels, reaching near two-year highs with a 78% jump from the last week, totaling $193 million. This uptick is mainly credited to the heightened trading of popular memecoins such as Pepe, Shiba Inu, and Floki, which saw their values more than double in a week’s time.
Ethereum Transaction Fees and DEX Volume Experience a Boost
The enthusiasm for memecoins was not the sole contributor to Ethereum’s financial boost. Decentralized exchanges (DEXs) on the Ethereum blockchain also saw a 40% increase in their trading volume, amounting to $20 billion. However, this raised activity has come at a cost to users, with network transaction fees, or gas fees, skyrocketing to an average of $28, pricing out many from participating in the network.
Layer 2 networks, which aim to scale Ethereum and reduce congestion, also saw fee increases, with Arbitrum hitting a $1 fee, the highest since last year. Nevertheless, the anticipated Dencun update, set to roll out next week, promises significant fee reductions on Layer 2 solutions.
ETH Burns Reduce Supply and Induce Deflation
On the flip side, Ethereum holders are reaping benefits from the network’s token burning mechanism, an aftermath of The Merge, which transitioned the network to a Proof of Stake system. This feature removes a portion of transaction fees from circulation, thus lowering the overall supply of ETH. Last week saw a reduction of 33,400 ETH, valued at around $130 million, contributing to an annual deflation rate of -1.45% for the cryptocurrency.
Such developments indicate a complex scenario where increased network use drives revenue but also raises costs, affecting accessibility. The upcoming network updates could alleviate some of these challenges as Ethereum continues to adapt to its growing ecosystem.