Ethereum Network Revenue Is About to Break a Monthly Record of $722 Million

This article comes fromDecrypt, original author: Jeff Benson

Translator | Nian Yin Si Tang

Summary:

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Summary:

- Transaction revenue (in USD) is a product of transaction fees and the price of Ethereum.

- Transaction revenue is growing rapidly due to demand for the network and consecutive record high ETH prices.

- Due to the imminent deployment of EIP-1559 and the continued progress of Ethereum 2.0, the revenue model will change in the coming months.Total transaction fees on Ethereum have never been higher as network usage grows (and consequent congestion) and ETH prices hit record highs.

, May 2021 transaction fees on the Ethereum network are on track to break the current monthly record of $722 million today, with about two weeks to go until May 2021 ends. If this trend continues, ethereum network revenue will exceed its first quarter total network revenue of $1.7 billion by the end of May.

The previous record was set three months ago in February 2021.

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Total transaction fees per day on Ethereum in USD. Image credit: Coin MetricsEvery time someone uses the Ethereum network to send funds or use a smart contract (automated code that they interact with, for example, bidding on an NFT at an auction or exchanging assets on a decentralized exchange), they must pay a fee, which This fee is eventually paid to the miners along with the newly produced ETH block subsidy.Transaction fees are constantly changing with network congestion: the more transactions are made, the higher the transaction fee if users are willing to pay additional fees. As such, this month’s record USD-denominated fees reflect not only overall network usage, but also Ethereum’s price action. a week ago,

According to data from Nomics

, ETH hit an all-time high of $4,165.Substack newsletterThis is both good news and bad news.

If Ethereum were a company, as former Ark Investment analyst James Wang said today

As envisaged in , these revenue numbers performed very well. “Based on April’s performance, Ethereum’s annualized revenue is expected to reach $8.6 billion, comparable to Amazon Web Services (AWS) in 2015,” Wang said of last month’s $716 million in revenue. Over the past five years, AWS has grown its revenue by 575%, and Ethereum enthusiasts certainly expected this to happen.

However, this depends on whether Ethereum can scale its operations. Each new block in the chain can only process a finite number of transactions, and the network is approaching its capacity limit. New records for transaction fees will depend not on more transactions, but on ETH price increases or users willing to pay higher gas fees to ensure their transactions get processed.

This is with everything remaining the same for now. But an upcoming ethereum network upgrade should change that.

The July network upgrade, known as the "London Hard Fork", will deploy the Ethereum EIP-1559 proposal.

The core of this proposal is to change the way of paying gas fees to miners. By adjusting the gas fee rate according to the actual usage demand, the utilization rate of the block is maintained at a half-full state, and the upper limit of the gas fee is dynamically adjusted. , to better cope with short-term peak demand and avoid network congestion caused by strong demand, thereby improving user experience.

But on the other hand, due to the deflation mechanism formed by the destruction of the basic fee, the value of each ETH is increased, but the block rewards of Ethereum miners are targetedly reduced. However, the increase in income from deflation is often unable to offset the reward of miners’ handling fees, so the final income of miners is reduced, which is the root cause of the controversy caused by this proposal.