Avalanche ranks among the third largest blockchains? An article discussing Avalanche's fee model
By: Matt Mizbani, Partner at Paradigm Ventures
compile: 0x11
1/ In the field of cryptocurrency, data indicators are often not as simple as they appear on the surface.
For example: Avalanche's recent network fee consumption rate has tripled at the beginning of the year (at this rate, it consumes about 400 million US dollars a year), becoming the third largest blockchain after Ethereum and Binance Smart Chain. What's going on here?
2/ Before diving in, let's take a look at the Avalanche fee model.
Avalanche borrows from Ethereum's EIP-1559. Users pay two fees for transactions: 1) a base fee set by the network based on block space requirements, and 2) a tip that determines how their transactions are ordered in a block.
3/ Avalanche also set a minimum Gas price, the current minimum is 25 nAVAX. For example, the gas fee for a transaction on a decentralized exchange is at least about $0.30.
Minimal fees mean the network is underutilized. But recently, the demand has increased - the actual network fee is 30-60 nAVAX higher than the minimum fee.
4/ What is driving this demand?
Crabada is Avalanche's last play-and-earn game, launching in November 2021. The amount of network block space it consumes has grown steadily over the past year. Today, the game’s main contract consumes more than 50% of transaction fees across the entire network.
5/ Get a feel for the scale: Crabada brought in $600,000 in transaction fees for Avalanche on Wednesday. That’s more transaction fees than Bitcoin, Solana, Polygon, Fantom, and Terra combined that day. So who is using Crabada?
6/ By analyzing trading activity on Wednesday (h/t @_anishagnihotri ), it looks like more than 25% of users may be bots playing the game. How do we know? The answer came from users who interacted with the Crabada contract and never had a break of less than 8 hours.
The specific user distribution data for Wednesday (Eastern Time) is as follows:
Robots: 1,862
Total users: 6,760
7/ Bots sent over 260,000 transactions to Crabada that day. A handful of bots sent over 1,000 transactions each, burning over $1,000 in AVAX each.
An address like the one below generated $38,000 in revenue and $23,000 in profit in one day: 0xf52827737a3f05d550a41b184a5d8db4df63eb21
8/ While bots may only account for 25% of users on a Wednesday, they account for the majority (55 %) of Crabada's total network spend.
More than 30% of the total fee income of the Avalanche network on that day may come from Crabada robots. At this rate, the annual consumption of network fees is about 120 million US dollars.
9/ For reference: The top contracts calculated by fee consumption on Ethereum include: OpenSea, Uniswap, Gem, USDT and USDC. No contract consumes more than 15% of fees.
10/ Why is this question important?
As more chains and scaling solutions are rolled out, builders and investors are relying on third-party tools for their need for network fee, user, and transaction data to help guide their work and investment decisions.
But a closer look reveals a more nuanced difference in block space requirements.
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