One type of “flippening” finally happened, but only miners are feasting.
Cumulative transaction fees paid to Ethereum (ETH) miners for 2020 are now close to double those of Bitcoin (BTC), clocking in at $276 million versus $146 million.
A chart released by Coinmetrics highlights how Ethereum fees went on a steep ascent in the latter part of the year, coinciding quite closely with the release of Compound’s token incentive. Cumulative 2020 fees on Ethereum equalized with Bitcoin’s on Aug. 12, continuing a break-neck ascent since.
This marks a distinct change from trends in transaction fees from past years, where Bitcoin generally dominated over any other network by a wide margin. In 2019, Bitcoin came out with a five-to-one advantage in the same comparison.
Cointelegraph previously reported that Ethereum first began posting higher daily fee revenue in June. As activity increased and the average transaction fee with it, total revenue began skyrocketing. Between August and September, Ethereum began breaking previous records and quickly became unusable for some participants.
The culprit is most likely the boom of decentralized finance and yield farming, though stablecoin transfers and some alleged Ponzi schemes also make up a significant portion of block space usage on Ethereum.
The current state of affairs is likely to wind down somewhat as DeFi euphoria settles, similarly to what happened in the crypto market at large in 2018.
It’s interesting to note that Ethereum fee revenue briefly exceeded the block rewards for a few particularly high-activity days in the past few months. Overall, fees have crept up to steadily over more than 10% of total issuance since May — a threshold achieved only a few times in the coin’s history.
This may be particularly valuable for ETH holders in light of the EIP-1559 proposal, which seeks to introduce a fee burn mechanism. While the specifics of the implementation imply that in periods of high activity there may still be bidding wars that directly benefit miners, high activity could lower the effective issuance rate to a significant extent.
For Bitcoin, raising transaction fees to cover existing issuance is crucial for its long-term future, since block rewards will eventually expire. However, the cryptocurrency space in the past two years has begun trending away from Bitcoin-centric use cases to stablecoins and DeFi. While Bitcoin usage remains high, losing dominance to other blockchains may prove catastrophic for its long-term prospects.