The development of a "hype cycle" is infectious in the digital asset industry and most of the time, the majority of users have a tendency to join the bandwagon. A similar situation is currently unfolding with regard to Ethereum and its ETH 2.0 plans , with many people flocking to the ecosystem with real optimism.
DTC Capital chief Spencer Noon recently said that Ethereum is the only network after Bitcoin to charge significant security transaction fees. He viewed the above-mentioned fact as a bullish sign. However, a recent Glassnode report shed additional light on this and clarified how these costs are split between different transactions.
EOAs are defined as accounts controlled by private keys and having no code associated with the blockchain. A higher percentage of users are generally EOA accounts.
The attached graph suggests that only 34.2% of network transactions were used to transfer ETHs between EOs, while only 10.7% of the total fees were spent on transactions in 2020. These statistics indicate clearly that ether transfers between users have not been the main use case of Ethereum .
So what about 89.3% of the transaction costs on Ethereum ?
The table below illustrates the full distribution of costs across Etheruem since 2016.
As identified, in 2020, approximately 52.4% of the costs are used in "other contracts". These "other contracts" do not use the ERC20 or ERC721 standards, which means that the ether is hardly used here for any use case. The report also adds:
"The USDT has gone from practically zero in early 2019 to almost 20% today. The other ERC20 contracts amount to 12.6% and the transfers of ETH between EOA 11.5% . Transfers from zero-value ETH to EOA ( 1.9% ), other stable transactions ( 1.4% ) and ERC721 contracts ( 0.8% ) play a secondary role. "
These other contracts in the discussion that have generated the biggest transaction fees included DeFi block, games, tokens and, surprisingly, a company called MMM Ponzi system. The fraudulent company also topped the list of total costs in 2020 among "other contract" transactions, which, to be honest, is not a good color on Ethereum .
The Stablecoin show has also dominated Ethereum's blockchain for the past few months, a topic intensely discussed in previous reports.
Are higher transaction fees still optimistic for Ethereum ?
Yes, higher transaction fees are always a positive scenario for Ethereum , but not for Ether.
We tend to forget that the development of Ethereum's blockchain has not translated into growth in Ether valuation in recent months. If the issue of stablecoins had directly translated into the real growth of crypto, the bullish story would have been justifiable.
However, it can be assumed that at this point the usefulness of cryptocurrency ether will be lower, as many issuers of the Ethereum blockchain , those who hold the assets, openly dump these tokens in order to free up money for their operations. . Consequently, it is possible that the valuation of Ether may suffer a new depreciation, even if its functional importance on Ethereum remains high.