Ethereum Average Transaction Fee Surpassed Bitcoin, But its Inaccurate to Compare

Ethereum Average Transaction Fee Surpassed Bitcoin, But its Inaccurate to Compare

On July 16, 2018, the average transaction fee of ether, the native cryptocurrency of Ethereum, surpassed that of bitcoin. But, it may be premature to conclude that ether is lagging behind bitcoin in scalability.

JZay, a bitcoin researcher, and investor shared a transaction fee comparison chart provided by crypto asset analytics platform Coinmetrics, as shown below. The chart portrayed a sudden spike in the transaction fee of ether, while the transaction fee of bitcoin has continuously declined over the past seven months. Mostly, until early July, the average transaction fee trends of bitcoin and ether showed same movements.

Why Ether Transaction Fee Spiked

The average transaction fee of ether spiked in early July due to a combination of two significant factors: the abnormal usage of airdrops by Chinese crypto exchange FCoin and alleged EOS-backed bots running spam attacks against the Ethereum network.

BTCManager recently reported that the Team JUST Discord, composed of popular decentralized application (dApp) developers, suspected EOS for funding bot accounts that have continuously spammed the Ethereum main chain for several days in a row, spending over 50 ether in 24 hours for gas costs.

Bot accounts created a fake ERC20 token called iFish, which copied and pasted the code of standard ERC20 token iFishYunYu, and started to initiate thousands of additional transactions with no value with the iFish smart contract. Consequently, the Ethereum blockchain network clogged up and legitimate users were forced to attach higher transaction fees to have their payments processed by the Ethereum network.

Before the EOS-bot account controversy, Chinese cryptocurrency exchange FCoin heavily congested the Ethereum blockchain network by running airdrops to vote for digital assets to list on its platform, which widely utilized Ethereum wallet MyCrypto developers said could have been done with internal votes and simple surveys.

The strange and illogical decision of FCoin to utilize airdrops and initiate hundreds of thousands of transactions on the Ethereum main chain to carry out operations that do not need to be conducted on a public blockchain network in the first place, crippled the Ethereum network for many hours.

Such unforeseen events led the Ethereum blockchain network to struggle in dealing with spam transactions and millions of data requests that had no value. As seen in the chart above, the average gas cost of Ethereum began to rapidly increase in early July 2018, precisely when the FCoin and bot funded accounts started to clog up the Ethereum network.

Average Transaction Fee Isn’t Accurate

More importantly, the average transaction fee is not an accurate indicator that can be used to measure and compare the capacity of two public blockchain networks that fundamentally differ regarding purpose, usability, and structure.

On the Ethereum network, gas is used to fuel dApps, processing of payments, and settlement of substantial information. On the Bitcoin network, however, transaction fees are primarily used to cover the costs involved in settling debts.

Hence, for Ethereum, given the variance in the platform’s usability, and various factors such as a sudden spike in the interest for a particular ICO or a dApp, average transaction fees can drastically change in short periods of time.

Vitalik Buterin, the co-creator of Ethereum, acknowledged that issues related to scalability would have to be fixed in the mid-term, potentially with two-layer scaling solutions such as Sharding and Plasma, to ensure both developers and users of dApps have a seamless experience in dealing with data on the Ethereum main chain.

Follow Us on Google News