In 2020, Ethereum’s cumulative transaction fees exceeded Bitcoin for the first time

A "flip" finally happened, but only the miners were enjoying it.

By SHEVCHENKO

Translated by: Zion Editor: Rose

Cumulative transaction fees paid to Ethereum (ETH) miners in 2020 were almost twice that of Bitcoin (BTC), at $276 million versus $146 million, respectively.

Data from Coinmetrics highlights how Ethereum fees have risen dramatically in the second half of the year, coinciding closely with the launch of Compound’s token incentives. Ethereum’s cumulative fees for 2020 equaled those of Bitcoin on August 12, and have continued to rise rapidly since then.

This marks a sharp departure from the past few years’ transaction fee trends, which have often seen Bitcoin’s transaction fees far exceed those of any other network. In 2019, Bitcoin’s fees were five times higher than Ethereum’s in the same comparison.

Cointelegraph previously reported that Ethereum surpassed Bitcoin in daily transaction fee revenue for the first time in June. Ethereum's total revenue began to soar as transaction activity and average transaction fees increased. Between August and September, Ethereum began to break previous records and soon became unusable for some participants.

The culprit is most likely the boom in decentralized finance and yield farming, although stablecoin transfers and some so-called Ponzi schemes have also taken up a large portion of Ethereum block space.

The current situation may ease as the DeFi craze cools down, similar to what happened across the crypto market in 2018.

Interestingly, in the past few months, on several days of particularly high trading activity, Ethereum’s fee revenue briefly exceeded block rewards. Overall, since May of this year, Ethereum fees have steadily climbed to over 10% of total issuance, a value that has only been reached a few times in Ethereum’s history.

This could be particularly valuable to ETH holders given that the EIP-1559 proposal seeks to introduce a transaction fee destruction mechanism. While the specific details of the implementation suggest that there could still be bidding wars that directly benefit miners during periods of high activity, active trading could significantly reduce the effective issuance rate.

For Bitcoin, increasing transaction fees to outpace the current block reward issuance rate is critical to its future, as block rewards will eventually disappear. However, over the past two years, the cryptocurrency space has begun to shift away from Bitcoin-centric use cases toward stablecoins and DeFi. While Bitcoin's usage remains high, losing its dominance to other blockchains could be catastrophic for its long-term prospects.