Summary:
- Ethereum blocks are consistently full since the rise of DeFi in mid-2020
- The majority of Ethereum blocks are at 95% or more
- Blocks can only include a specific amount of transactions and users are consistently paying higher fees to get their transaction processed quicker
- Transaction fees now make up 50% of Ethereum miner revenue
Blocks on the Ethereum network are consistently processing transactions at near full capacity. This is according to data from CoinMetrics’ 95th issue of ‘the State of the Network Report’ which explains the phenomenon as a consequence of the rise of DeFi since mid-2020.
Since the rise of DeFi in summer 2020, Ethereum blocks have consistently been at least 95% full. In March 2021, blocks have been 97%-98% full. Scarce block space has been a big factor in escalating gas prices.
Ethereum Fees Now Make up 50% of ETH Miner Revenue
The report went on to provide the following chart providing a visual cue of how Ethereum blocks have been operating at peak capacity.
Ethereum blocks constantly being full means that ETH users are also incentivizing miners to process their transactions by increasing the amount of gas they are willing to pay. By sending a transaction with a relatively higher gas fee, users guarantee that their transactions will be processed in the next available block. Consequently, transactions with lower ETH gas fees get bumped down the queue.
Ethereum users’ demand to get their transactions included in the next available block has been the main cause of ETH gas fees surging in the last few months. According to Coinmetrics, the surging fees now make up 50% of Ethereum miner revenue as explained below.
For context, at the peak of the 2017/2018 bull run, the average Ethereum transaction fee reached $5.70. Ethereum average transaction fee has been more than $5.70 every day since January 18th, 2021. The median transaction fee has been above $10 for most of the year…
Average gas price surged to its highest levels ever over the summer of 2020 due to the rise (and fall) of DeFi. The growth of decentralized trading, on-chain arbitrage, yield farming, and new token launches all contributed a sharp rise in competition for transaction priority, which led to escalating gas prices.