The price of ETH was cut in half in May. Why did the income of miners increase significantly?
Author: Jasmine; Editor: Wen Dao
Author: Jasmine; Editor: Wen Dao
A tumultuous May is over, with neither Bitcoin (BTC) nor Ethereum (ETH) recovering losses from their highs. While the Chinese miners of Bitcoin are still anxiously waiting for the policy to supervise the clearing of mines, the Ethereum miners who use graphics cards to mine have ushered in a "salary increase".
According to TheBlock data, the total income of Ethereum miners hit a new record in May, reaching US$2.35 billion. Among them, on-chain transactions contributed US$1.03 billion in fee income to miners, accounting for 43.8% of the total income.
According to historical statistics, miners’ on-chain transaction fee income has increased significantly since August last year, and once surpassed block reward income in February this year. The increase in transaction fees is strongly related to the expansion of the DeFi ecosystem on the Ethereum chain.
In the past year, the network fee income brought by Ethereum to miners has gradually approached the mining reward income. For two months, the fee exceeded the mining reward. Letting the handling fee become one of the value capture methods of ETH is exactly the meaning of the transformation direction of Ethereum.
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5.19 crash day, Ethereum miners make a fortune
On June 1, Binance showed that ETH closed at $2,551, a 41% drop from the historical high of $4,372 on May 12, and failed to recover the lost ground of $3,000 at the end of May.
According to The Block data, in the total income of the miners of 2.35 billion US dollars, the block reward income reached 1.32 billion US dollars, and the transaction fee income on the chain was 1.03 billion US dollars. 43.83%.
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After June last year, the growth rate of miners' income accelerated
The multi-indicator innovation record of Ethereum in May is not only related to the fact that the price of ETH climbed to a record high in that month, but also related to the sudden collapse later, especially the on-chain transaction fee part of miners’ income. On May 12, the high price of ETH On May 19 and the day of the plunge, the transaction fee reached the peak of miners’ daily income.
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The trend of the total transaction fee of ETH in May
According to data from TokenView, on May 12, the average transaction fee for a single transaction on the chain was $69.38, and the total transaction fee on that day exceeded $112 million. On the day of the crash on the 19th, the average handling fee for a single transaction was $71.77, and more than 30,000 ETH worth more than $100 million on the chain entered the pockets of miners.
In comparison, when ETH was at a very high price in May, the income of mining rewards denominated in US dollars was higher than the crash price on the 19th. 39829ETH when the currency price peaked.
Regardless of whether the price of ETH is high or falling, the income of miners such as transaction fees on the chain will be guaranteed. This is undoubtedly related to the development of the DeFi ecosystem on the Ethereum network. The higher the demand for network resources by applications and users, the more network congestion will occur. The more substantial the on-chain transaction fee contributed.
It is no surprise that on-chain transaction fees reached their monthly peak on May 19. No wonder some investors commented that, regardless of regulatory factors, Ethereum mining is an investment with high certainty and high returns, "When the price rises, the miners earn more; when the price falls, especially when it plummets, DeFi Liquidation can continue to contribute revenue.”
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Increase in transaction fee income exceeds mining rewards
From the data of TheBlock, it is not difficult to find that since June last year, the income of Ethereum miners has increased significantly, and the income from transaction fees on the chain has increased significantly compared with two years ago.
In the past, the increase in transaction fee income only occurred in December 2017 and January 2018. It is well known in the currency circle that it was the period when the ICO currency issuance behavior appeared on the ETH chain on a large scale.
The total amount of transaction fees on the ETH chain has also been rising along with the prosperity of these applications. Since June last year, the DeFi market has just passed a 12-month annual cycle. Honeycomb Finance found that the income structure of Ethereum miners has changed significantly during the year, and the transaction fee income is approaching the block reward income of mining, and even surpassed the block reward income in September last year and February this year income.
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Changes in the 12-month income structure of ETH miners
In June 2020, among the total income of miners of US$110 million, mining rewards were US$90 million, and on-chain transaction fee income was US$20 million, accounting for only 18.19% of the total income. By May of this year, mining rewards accounted for 56.17% of miners’ $2.35 billion in revenue, and transaction fee revenue had reached 43.83%.
Within a year, the proportion of miners' mining reward income has shown a gradual downward trend, while the proportion of transaction fee income has increased, and the growth rate is even higher. In the past 6 months, the total income of mining rewards has increased by 403% compared with the first half of the year; the total income of transaction fees in the first 6 months was 450 million US dollars, and after the next 6 months, the total income of this part has increased to 3.56 billion The US dollar has increased by 691% in half a year.
Such an increase shows the importance of ecological activity on the chain to the income of miners. However, the high transaction fee on the chain has fattened the Ethereum miners, which is not a healthy situation for network users. The cost of use caused by congestion and high fees is ultimately on the "sheep". This sheep includes both DeFi users, including on-chain applications.
The fee structure is one of the reasons why ethereum implemented the EIP-1559 proposal in the July London upgrade.
The proposal directly designs a pricing mechanism for network transaction fees, dividing the fee structure into basic fees and tips. Among them, the miners will not get the basic fee, and this part of the fee will be destroyed; the tip from the user's pricing reward belongs to the miner.
Such a design will undoubtedly reduce the network fee income of miners. But at the same time, EIP-1559 stipulates that when the capacity of each block exceeds the target Gas usage, the basic fee will increase in the next block; otherwise, it will decrease. This allows the gas fee to be adjusted according to the demand of the network. For users, choosing a tipping fee according to the network situation is undoubtedly more flexible than the current unpredictable transaction fee.
EIP-1559 adjusted the fee structure of the network, and the destruction-style deflation is conducive to the value capture of ETH, but it can also be seen that the total capacity of the network and the block generation time will not change, which means that network congestion and inefficient There is no cure for the problem.
