The fees on Ethereum and Bitcoin have ramped up over the previous weekend, and they have increased by twofold what they were the week before. What could be the cause of this instantaneous fee increase, and what are its implications for the future? This is what we will be considering in this article.
Although the Bitcoin and Ethereum fees are significantly lower than they were during the bull market in 2021, the sudden fee increases are a surprise to some. It has been nearly 3 years since such an increase in Bitcoin and Ethereum fees has been witnessed.
These fees are set by supply and demand for blockspace. Meanwhile, both Bitcoin and Ethereum have a constant supply, but increased demand is what causes the fees to increase in return. As a result, users will have to increase their incentives for miners and validators to stimulate faster transaction processes.
In the case of Bitcoin, the rise in demand is emanating from the invention of inscriptions, ordinals, and BRC-20 standards. The BRC-20 standard facilitates the minting of coins on the Bitcoin blockchain.
Meanwhile, in the case of Ethereum, it seems that the cause of the fee increase is the rise of memecoins. This has caused network congestion and, subsequently, increased fees. This has also caused the burning of Ethereum tokens to increase, resulting in a lower supply of ETH (which is beneficial to long-term investors).
Investors’ Takeaway
Monitoring the free market is a nice way of knowing how usage is growing and what is causing the increase in demand. Some in the Ethereum and Bitcoin communities believe that memecoins are silly; these tokens play the role of strengthening security by paying validators and miners. No one likes to pay higher fees, but this helps to make the blockchain stronger.
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