Stablecoins increase and DeFi growth raises Ethereum commissions to a maximum of 2 years

The average transaction fees in the Ethereum network are the highest seen in two years and have exceeded Bitcoin’s fees for the second time in the last three months.

Recently, Coinbase researcher Max Bronstein tweeted the graph below and suggested that the most recent increase in commissions seems to be largely due to increased interaction with stablecoins on the Ethereum network.

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Tx. fee earnings of Bitcoin and Ethereum

As previously reported by Cointelegraph, stablecoin, Tether’s USDT, is the largest user of gas in the network, with about $2.56 million spent on Ether’s gas commissions in the last month according to ETH Gas Station. While stablecoin activity is certainly one of the main reasons for the sharp increase in average commissions for Ether’s transactions, it is certainly not the only one.

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USDT, DeFi and Ether are leading to higher rates
ETH Gas Station data shows that USDT is the largest gas consumer within the network, followed by popular DeFi dapps such as Uniswap and Kyber Network. This shows that DeFi is also an extremely important factor to consider when analyzing the increase in gas commissions.

As reported by Cointelegraph, gas usage increased to an all-time high in May, but the number of transactions is not at its peak. This shows that current activity is not only coming from simple transactions such as USDT transfers but also from complex smart contracts.

While the number of daily transactions is far from the January 2018 historical peak of 1,349,890 transactions, other parameters point to increasing interest or at least the movement of Ether himself (ETH).

ETH Active Supply 3y-5y

As shown in the graph above, Ether’s active supply is at its highest in relation to the Ether units that have moved in the last 3 to 5 year period.

Other signs of growing interest in altcoin can be seen in the derivatives market, where Ether’s open interest in options has grown at a truly phenomenal rate. Deribit’s open interest has increased by 315% which would equal about $158 million in the last two months, temporarily exceeding the interest shown in Bitcoin options (BTC).

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What do increased commissions mean for Ethereum?
The growing interest and activity in the Ethereum network may cause a bittersweet taste for blockchain fans. While this growth reveals an increase in interactions with Ether and dapps running on the Ethereum network, it also highlights the network’s growing technical debt.

Ethereum 2.0 will be released this summer and promises to solve today’s scalability issues with its Sharding technology. However, it will take more than a year to complete the new iteration of the block chain and for the current block chain to migrate to the new staking and sharding system.

As Joseph Todaro, managing partner of Blocktown Capital, pointed out in a recent tweet, these scalability issues can move users and potential businesses away from the Bitcoin Evolution network to other smart contract platforms with better scalability solutions and less congestion.

If investment continues to pour into Ethereum applications, the pressure for an effective and easy-to-deploy solution will continue to grow. Solutions such as increasing the total gas allowance per block can help avoid congestion, but only solve the problem in the future and exacerbate some of the other network challenges, such as the growing size of the block chain.