Breaking news: the day before yesterday the average cost per transaction on the Ethereum blockchain rose to almost $15.
Only three days earlier it was $4, and yesterday it was at $10 already.
What generated this spike?
Ethereum news: the airdrop on XEN
According to some, what generated this significant and sudden increase in fees was an airdrop on XEN.
To be precise, the cause would be the VMPX token.
In reality, it appears that this was an attempt at fraud.
Indeed, a tweet had been posted on the official VMPX Twitter profile, which was later removed, announcing an airdrop of VMPX tokens.
No such airdrop took place, but many people who wanted to receive VMPX tokens raised fees as high as $317 per transaction.
The VMPX token
The VMPX token landed on the crypto markets only in early May, and since then it has already lost 80% of its value.
In fact, on the very day it was launched, it went from $0.25 to $0.38 in just a few hours, immediately setting an all-time high.
It later dropped to $0.14 within just three days, then plummeted to $0.05 in late May.
In early June it bottomed out below $0.04, but just before the middle of the month it began a brief climb back up to $0.18.
Following this rebound, however, it collapsed again, eventually falling back below $0.08.
VMPX is a meme token using the BRC-20 format, i.e. it is an Ordinals on the Bitcoin blockchain.
By contrast, the fake airdrop that had been announced on XEN was regarding its ERC-20 version on the Ethereum blockchain.
It had made headlines just before mid-May when the BRC-20 memecoin trend had broken out.
Ethereum news: the rise in fees
Right around that time, fees on Bitcoin’s blockchain exploded.
Taking the average daily cost per single transaction as a reference, they rose above $30 on 8 May, up from $2.9 at the beginning of the month and $3.1 on the 14th.
VMPX was launched on 9 May.
It is worth noting that at the end of April the average fees on Bitcoin on-chain transactions were less than $1, and now they are at about $1.5.
Thus memecoins like VMPX had already raised fees in May on Bitcoin’s blockchain.
Something similar is also happening in recent days on the Ethereum blockchain, although the spike was lower ($14).
It is worth mentioning that on the Ethereum blockchain there was also a spike in the average cost per transaction in early May to $27.
The difference is that the May spikes were due to actual token launches, while the one the day before yesterday was probably also due to a scam attempt.
Blockchain congestion
Blockchains have a maximum limit of transactions beyond which they can no longer handle them all.
Transactions that are not handled end up in a kind of queue that is generally disposed of more or less quickly over time.
Since transactions with higher fees are processed first, those who need to jump the queue are actually forced to pay much higher fees than average. Therefore, when the queue is long, the cost of fees actually increases.
The solution would be to bypass the queue completely, simply by not recording transactions on the blockchain. This is actually done by the Lightning Network (LN), which is the main layer-2 of Bitcoin.
LN has no real upper limit on the number of transactions that can be recorded, because anyone can create a node and manage as many as they want.
On Ethereum such off-chain solutions are not yet widely used, because people prefer to use sidechains or otherwise solutions that favor on-chain registration of all transactions.
It is worth mentioning, however, that the maximum limit of transactions that Ethereum’s blockchain can support is far higher than that of Bitcoin.
Source: https://en.cryptonomist.ch/2023/07/07/ethereum-news-rising-fees-because-token/