Meme Coin Frenzy Drives Ethereum Network Fees to Nearly 2-Year High: IntoTheBlock

The increased network activity is benefitting ether investors by burning the token's supply at a faster pace, but it has also made Ethereum "unusable" for many due to sky-high transaction costs, IntoTheBlock analysts noted.

Mar 8, 2024 at 9:09 p.m. UTC

Updated Mar 8, 2024 at 9:15 p.m. UTC

Shiba inu dog — Dogecoin, a meme based on the shiba inu dog breed, was started as a joke in 2013. (Christal Yuen/Unsplash)

The Ethereum network's revenue surged to nearly two year highs this week as the speculative frenzy with meme coins boosted blockchain activity, IntoTheBlock noted in a Friday market report.

IntoTheBlock data shows that Ethereum mainnet's revenue from network fees reached $193 million this week, the highest figure since May 2022 and a 78% increase from last week.

Ethereum network's daily revenue from fees hit its highest since May 2022. (IntoTheBlock)

The on-chain activity was largely driven by increased speculation with meme tokens, IntoTheBlock analysts said. Ethereum-based meme tokens such as pepe (PEPE), shiba inu (SHIB) and floki (FLOKI) more than doubled in price over the past week as retail

Meanwhile, trading volumes on decentralized exchanges (DEX) built on top of Ethereum jumped 40% to $20 billion this week, DefiLlama data shows.

The frenzy is benefitting investors who hold ether (ETH), the network's native token, because of its token burning scheme. After Ethereum's transition to a proof-of-stake blockchain – commonly referred to as the Merge –, the network destroys a part of the transaction fees paid by users, decreasing the token's supply.

Over the past week, ETH's supply shrunk by some 33,400 tokens (worth roughly $130 million at current prices), and is deflationary at a 1.45% annualized rate, according to Ultrasound.money data.

On the other hand, the heightened activity has made the blockchain very pricey for users. Average transaction costs (gas fees) on Ethereum rose to as high as $28 this week, making it "unusable" for many users, IntoTheBlock noted.

Fees on layer 2s, designed to scale the Ethereum network, also surged, with transactions costing as much as $1 on Arbitrum, the highest since 2022, the report said. This issue has a quick fix though with the Dencun upgrade coming up next week, which is expected to lower transaction costs on layer 2s to cents.

Ether briefly topped $4,000 on Friday for the first time since late 2021, but tumbled over 4% along with bitcoin (BTC). Recently, ETH changed hands at around $3,900, up 15% this week, in line with the broad-market CoinDesk 20 Index's (CD20) advance.

Edited by Stephen Alpher.

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Meme Coin Frenzy Drives Ethereum Network Fees to Nearly 2-Year High: IntoTheBlock

The increased network activity is benefitting ether investors by burning the token's supply at a faster pace, but it has also made Ethereum "unusable" for many due to sky-high transaction costs, IntoTheBlock analysts noted.

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