What a FEEasco. Ethereum gas fees reach devastating new highs as new DeFi protocols require more complex transactions, and demand fueled by yield farming continues to increase.
Fees on Ethereum are measured in gas. More complex transactions require more gas, and the price paid for gas fluctuates with changes in demand. These fees go directly to miners, who will prioritize transactions with a higher fee.
But Ethereum can only handle certain transactions per block and certain blocks per second – so there is a technical limit to how much can go through. As a result high demand causes a bidding war that causes transaction fees to increase.
March 19: Black Thursday
$1.31 in average gas fees
Back in March we wrote about a spike in transaction fees on Ethereum, a day people then coined as “Black Thursday”. The price of ETH had crashed, causing high network congestion as users all tried to exchange their ETH tokens. That’s the first spike on the graph above, which now looks very insignificant in comparison to what happened next.
June 10: An Unfortunate Mistake
$4.11 in average gas fees
Transaction details, which are publicly available, reveal that the second spike in June was caused by one user paying $3.9M to transact $200. The Ethereum mining pool who received the fee even offered to reimburse them, but the user never came forward.
Most people seem to think this was a mistake, in which the sender swapped “value” and “transaction fee” fields in an API call, as Cornell computer science professor Emin Gün Sirer explained on Twitter. Others argue the transaction was an intentional tax evasion tactic.
July 17: The launch of Yearn Finance’s $YFI
$1.81 in average gas fees
Yearn Finance is a set of smart contracts that move assets between liquidity pools to generate the highest interest – like a very smart savings account. At the time of writing YFI is worth over $33.9K per token.
The lead developer behind it, Andre Cronje, decided that he would create a $YFI token, and with that pass over control/governance of the entire yearn.finance suite of tools. Despite having the power to give himself a pre-mine or founder reward, he elected instead to keep zero tokens for himself. This promoted the need for fair initial token distributions that optimize for decentralization. Read more.
August 11: The Launch of Yam Finance’s $YAM
$6.55 in average gas fees
YAM drew attention to the major risks that exist with providing liquidity to these new DeFi experiments. Within 36 hours, $750 million were deposited into Yam.Finance, or 10% of DeFi’s market cap at the time. A bug in its code caused the coin to lose control of its on-chain governance feature, and despite urging users to retrieve their tokens, a total of $750,000 remained stuck in the protocol forever. YAM 2.0 is now on the way.
August 28: The Launch of SushiSwap’s $SUSHI
$15.33 in average gas fees
The launch of $SUSHI and the events that followed are a real saga. Here’s a quick recap as of September 14th:
- SushiSwap forked the code of Uniswap, which was at that point by far the largest decentralized exchange or automated market maker.
- SushiSwap introduced $SUSHI which would reward both liquidity providers and token holders.
- Cofounder Chef Nomi cashed out to take $14 million after a week’s worth of work on the project.
- The admin key to SushiSwap was handed over to Sam Bankman-Fried, the CEO of FTX, a cryptocurrency derivatives exchange that is behind a project that is building a DEX on a competing blockchain called Solana. Sam made a proposal to build support for SushiSwap on Solana.
- There was a migration of liquidity from Uniswap over to SushiSwap. In the end SushiSwap had $1.2B, and Uniswap was left with only $400M.
- On Friday September 11th, Chef Nomi returned the $14 million back to the treasury
