Ethereum outperformed Bitcoin for the 1st time in terms of total fees generated over the year.
Ethereum generated nearly $ 600 million in fees during the year 2020, which is 83% more than Bitcoin.
This is the highest annual fee total ever seen on a blockchain platform.
While Bitcoin has already passed its old record high of 2017 handily, Ethereum is still trying to climb back to its peak of $ 1,448. That said, it now looks like Ethereum is bouncing back, crushing Bitcoin in terms of transaction fees generated.
Determining the underlying value of a blockchain-based network can be complicated, especially when it doesn’t have traditional assets to help guide its valuation. That said, the transaction fees generated can be a solid indicator of network activity.
Classify the Ethereum network through its fees
For the first time in its history, Ethereum generated a total of fees greater than that of Bitcoin , by a significantly greater margin. According to Glassnode, an on-chain market analysis firm, Ethereum users spent 83% more on total network fees than on Bitcoin.
According to a tweet from Glassnode CTO Rafael Schultze-Kraft: “In 2020, Ethereum overtook Bitcoin in terms of network fees. Users spent nearly $ 600 million in fees on the Ethereum network last year, 83% more than on Bitcoin ”.
In 2020, Ethereum even managed to outperform Bitcoin network fees during its meteoric rise to its previous record in 2017.
A very different landscape
In 2019, Ethereum generated less than $ 50 million in transaction fees. Even in 2018, the year it hit its all-time high, Ethereum generated just over $ 150 million in fees.
How then to explain this drastic increase in the total value of transaction fees on the Ethereum network?
The arrival of decentralized finance ( DeFi ) and decentralized applications ( dApps ) is proving to be one of the main factors contributing to this increase.
At the end of 2019, well under $ 1 billion in total value was locked in DeFi apps, which mostly run on the Ethereum network. These applications allow financial transactions such as loans, insurance and trading operations to be carried out without having to resort to a third party. This allows for much more competitive rates and returns more value to the user.
At the end of 2020, the total value locked in in DeFi stood at over $ 16 billion, a growth of over 2,500%. This massive increase in the use of DeFi applications, due to platforms like UniSwap and MakerDao , has led to a sharp increase in fees on the Ethereum network.
This has advantages and disadvantages. On the one hand, this rise indicates a sharp increase in the use of the platform, but it also underlines the extremely high fees that users have to pay to complete transactions.