Cumulative Ethereum fees far higher than Bitcoin’s in 2020
On some particularly busy days, Ethereum’s miners generated greater profits from the commissions paid by users than from block rewards.
Ethereum (ETH) miners‘ (ETH) commissions in 2020 were almost twice as high as Bitcoin (BTC) commissions, worth $276 million and $146 million, respectively.
A chart published by Coinmetrics shows that Ethereum commissions increased significantly, particularly in the latter part of the year, in parallel with the launch of the token compound. The overall value of Ethereum’s commissions reached Bitcoin’s on 12 August, and then continued to grow at a dizzying pace.
This is a marked change from previous years, when the total value of commissions on Bitcoin was far higher than any other network. Suffice it to say that in 2019 Bitcoin’s commissions were five times higher than those of Ethereum.
As early as June, Crypto Code had already reported an increase in daily revenue for Ethereum’s miners. Network activity has increased, and with it the average cost of commissions: this has obviously boosted the miners‘ profits. Between August and September, Ethereum broke all previous records and became de facto unusable for some network participants.
The reason for this exponential growth is probably related to the boom in decentralised finance and yield farming, although stablecoin transfers and alleged Ponzi schemes account for a significant portion of the network’s activity.
It is likely that once the euphoria around DeFi has subsided, the network will also return to normal, similar to what happened in the cryptocurrency market during 2018.
Interestingly, on some particularly busy days, Ethereum’s miners have generated greater profits from commissions paid by users than from block rewards. Since May, commissions have accounted for more than 10% of miners‘ revenue – a figure only achieved a few times in ETH’s history.
This could be a potentially rewarding development for ETH HODLers in light of the EIP-1559 proposal, which will introduce a fee burn mechanism. In other words, during periods of high activity, the rate of money issuance would actually be reduced.
As far as Bitcoin is concerned, increasing the cost of fees will be crucial to secure the future of the network, as block rewards will decrease more and more until they disappear completely. However, in recent years the cryptocurrency industry has begun to move away from BTC in favour of stablecoin and DeFi-based use cases. Although the use of Bitcoin still remains very high, losing its dominance over the other blockchains could lead to catastrophic results in the long run.