Over the past five days, users of the Avalanche network have collectively paid more than $4 million in transaction fees. This significant expenditure is primarily attributed to creating and moving tokens and non-fungible tokens (NFTs) using inscriptions, a novel method gaining traction in the blockchain world.
Inscriptions have emerged as a creative bypass on networks like Bitcoin, which lack native token support. By embedding text in standard blockchain transactions and employing an external numbering system, these inscription-based tokens offer a unique approach to token creation and movement.
Initially developed for Bitcoin, their utility has extended to other blockchains such as Arbitrum, Polygon PoS, and so on, mainly due to the cost-effectiveness of transferring these tokens compared to native ones. The recent phenomenon of Avalanche stands out in terms of scale and cost.
Avalanche’s Unique Position In The Inscription Phenomenon
A deep dive into the data reveals intriguing details about this surge in fees on Avalanche. According to a Dune Analytics dashboard crafted by Hildobby, the $4.06 million in fees paid on Avalanche constitutes 75.32% of all inscription-related fees across multiple blockchains on the dashboard.
This spike in transaction costs is not merely a byproduct of inscriptions but also a result of a significant increase in general network transactions, leading to heightened demand for block space on Avalanche. This has culminated in a dramatic spike in gas prices, with costs soaring over 5,000 nAVAX per unit on December 18.
Notably, the more recent spike in Avalanche fees indicates a growing trend in using inscriptions on the network. To date, Avalanche has processed 63 million inscription-related transactions, according to data from Dune Analytics.
Market Impact And Broader Implications
The rise in transaction fees on Avalanche has coincided with notable market movements. The blockchain’s native token, AVAX, has experienced a significant increase in value, surging by over 10% in the last week.
Despite a 6.5% drop in the past 24 hours, AVAX continues to trade above the $39 mark. Concurrently, there has been a decline in the asset’s trading volume from over $3 billion last week to around $1.3 billion as of today.
This trend in Avalanche is not an isolated case in the crypto world. Users on various blockchain networks are increasingly encountering substantial transaction fees. A recent incident involving a Bitcoin whale who accidentally paid a network fee of $3.1 million underscores the potential for high costs in crypto transactions.
Though the mining pool AntPool has offered a refund, this incident highlights the complexities and sometimes the high stakes involved in blockchain transactions.
Featured image from Unsplash, Chart from TradingView
Source: https://bitcoinist.com/avalanche-users-shell-out-over-4m-inscription-fees/