📈 Ethereum | Gas Fee Surge
What are the primary factors driving the surge in Ethereum gas fees since April and how have these fees impacted user activity and adoption of Layer 2 solutions?
Here is a deep dive dashboard that investigates the recent surge in Ethereum gas fees since the beginning of April, with a focus on the top decentralized applications (DApps) and use cases that have contributed to this increase.
Additionally, we will explore the amount of ETH burned as a result of these top apps in terms of gas fees and determine if the increased gas fees have discouraged users from interacting with Ethereum.
Lastly, we will examine the use cases that have diminished due to high gas fees and those that persist, as well as the adoption of Layer 2 solutions as a result of elevated fees on Layer 1.
The recent surge in Ethereum gas fees has been a major topic of discussion in the blockchain community. This increase in gas prices has made it expensive and inconvenient to use Ethereum-based applications, and it has led to a decline in user activity. This analysis investigates the recent surge in Ethereum gas fees, with a focus on the top decentralized applications (DApps) and use cases that have contributed to this increase. Additionally, we will explore the amount of ETH burned as a result of these top apps in terms of gas fees and determine if the increased gas fees have discouraged users from interacting with Ethereum. Lastly, we will examine the use cases that have diminished due to high gas fees and those that persist, as well as the adoption of Layer 2 solutions as a result of elevated fees on Layer 1.
The average gas price on Ethereum has been on the rise since the beginning of April, reaching an all-time high of 500 gwei on May 5th. This increase in gas prices is due to a number of factors, including:
- Increased demand for Ethereum-based DeFi applications
- Increased demand for NFTs
- Increased activity on Ethereum-based exchanges
- The launch of new Ethereum-based projects
The top DApps and use cases that are driving gas fees on Ethereum include:
- New contracts creation re: CHADMIN
- Decentralized exchanges (DEXs)
- Yield farming platforms
- NFT marketplaces
- Stablecoin exchanges
- Lending and borrowing platforms
These DApps and use cases are all popular with users, and they require a significant amount of computation and data storage, which drives up gas fees.
The amount of ETH burned on Ethereum has also been on the rise since the beginning of April. This is due to the fact that a portion of the gas fees paid on Ethereum are burned, meaning they are permanently removed from circulation. The top dapps that are burning the most ETH include:
- Uniswap
- USDT
- Metamask
- Zen Torrent
- Blur
These dApps are all popular with users, and they require a significant amount of computation and data storage, which drives up gas fees and the amount of ETH that is burned.
To calculate the amount of Ethereum gas burned per transaction, you need to consider the gas price and the gas limit of the transaction. The formula to calculate the gas fee for a transaction is:
- Gas Fee = Gas Price * Gas Limit
- The gas price is denoted in Gwei (1 Gwei = 0.000000001 ETH)
- To calculate the amount of Ethereum gas burned, you need to multiply the gas fee by the gas limit and then convert it to ETH
- Gas Burned = (Gas Fee * Gas Limit) / 1,000,000,000
The increase in gas fees has had a negative impact on Ethereum user activity. The number of daily active addresses (DAAs) on Ethereum has been in a declining plateau since the beginning of April. This decline in DAAs is likely due to the fact that high gas fees make it expensive and inconvenient to use Ethereum-based applications.
Use Cases Affected by High Gas Fees: The use cases that have been most affected by high gas fees are those that require frequent and small transactions, such as DeFi and NFTs. These use cases are often seen as being too expensive to use by many users.
In response to the high gas fees on Ethereum, a number of Layer 2 solutions have been developed. Layer 2 solutions are designed to reduce gas fees by moving some of the computation and data storage off of the Ethereum mainnet. The most popular Layer 2 solutions include:
- Polygon
- Optimism
- Arbitrum
These Layer 2 solutions have seen a significant increase in adoption in recent months, as users look for ways to reduce gas fees.
If the trends of high gas fees and declining user activity persist, it is likely that Ethereum will lose market share to other blockchains that offer lower fees and a better user experience. However, if Ethereum is able to address the issue of high gas fees, it is still well-positioned to remain the leading blockchain for DeFi and NFTs.