Having clocked up some impressive miner revenue metrics earlier this year, Ethereum revenue fell to a five year low on Sunday. Let's take a look at what has driven those metrics.
In a tweet on Monday, blockchain analytics firm Glassnode showed that miner revenue had fallen to a five year low of $23,600 on the Ethereum network on Sunday. The drop coincided with Ethereum’s mining difficulty reaching a new all time high. .
As it stands today, Ethereum employs a proof of work-based algorithm. Ethereum network difficulty relates to the difficulty of a problem that miners have to solve in order to find a block. As hashrate (the total computational power being applied to the network) increases, it results in the network difficulty being adjusted upwards.
And yet the previous months have also seen Ethereum’s miner revenue outpace that of Bitcoin. According to data obtained via CoinShares, Ethereum revenue reached $1.39 billion in April against Bitcoin revenue of $1.16 billion for the same time period. This is the fourth consecutive month in which Ethereum miner revenue outpaced that of Bitcoin.
In January, an Ethereum miner earned 170 ETH for mining a single block that contained 236 transactions.
While Ethereum is seeing increased activity related to DeFi, GameFi and NFTs, the comparative unit prices of the two leading digital assets during these time frames has a lot to do with the disparity in mining revenue.
Although all of this may be positive in terms of an incentive model for miners, these are real costs that users are incurring. Everyday users of the network have had to suffer through high gas fees.
At the end of last month, Bored Apes Yacht Club creator Yuga Labs sold parcels of virtual land on Otherside, its metaverse project. The price to mint the associated Otherdeed NFTs was more than the cost of the virtual land itself. $123 million in transaction costs were incurred through the sale. Aside from Ethereum transaction fees going into thousands of dollars, the overwhelming demand clogged the network and crashed blockchain explorer, Etherscan.
While project enthusiasts may be heartened on the one hand that the network is proving to offer greater incentives than the Bitcoin network to some stakeholders, they will likely be eager to see the network transition to a more efficient model.
Ethereum is in the process of moving to a proof of stake-based algorithm. With that evolution to ETH 2.0, it’s expected that exorbitant transaction fees will be a thing of the past for network users. Similarly, transaction throughput will be increased considerably, making Ethereum a feasible prospect from a scalability perspective.
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