In September, for the first time in history, Ethereum miners received more income from transaction costs than from block rewards, converted into dollars. According to research by The Block, Ethereum miners received $172 million in transaction costs and $150 million in block rewards.
This can be seen on the graph below from The Block:
Transaction costs and block rewards?
As with bitcoin, ethereal transactions are processed on the blockchain, a logbook in which all transactions can be found. Transactions are processed in blocks by participants on the network which we call miners.
These miners use their computer power for this purpose. In exchange for processing transactions, they receive two types of rewards: the transaction costs of all individual transactions and a fixed block reward per processed block (approximately 3 ether, or 940 euros).
Ethereal transaction costs higher than bitcoin
How does the transaction cost of ethereal relate to bitcoin? You can see this on the graph below, from blockchain analysis agency Glassnode.
The Y-axis can hardly process the data, but what you should see is that the total transaction costs of Ethereum reached a record high of USD 172 million last month. That is much more than the USD 26 million paid to bitcoin miners.
For a long time, the fees for ethereum lagged behind those for bitcoin. In May, you even saw bitcoin’s fees skyrocket, which is the month of bitcoin block halving. But just after the halving, ethereum took over from bitcoin. The transaction costs skyrocketed, but why is that?
DeFi provides more income for ethereum miners.
The enormous growth in transaction costs on the Ethereum network is due to the emergence of Decentralized Finance (DeFi). At its peak, a single transaction to the decentralised stock exchange cost more than 50 dollars. The miners in particular were very happy with this, as it enabled them to generate a lot of income.
On the graph below from Bitinfocharts, you can see that ethereal transactions are still relatively expensive at the moment, but much cheaper than the peak in September.
Different way of processing transactions
At the moment, the computer power still determines which of the ethereum miners may add a block of transactions to the blockchain. But that is about to change.
With Ethereum 2.0 we will switch to Proof of Stake. This is a method in which the number of coins of a transaction processor is decisive. Whoever has more coins has a better chance of adding a block of transactions to the chain.
This is a more energy-efficient way of processing transactions than bitcoin. What else does Ethereum 2.0 have to offer? You can read about it in this article.
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Posted in Bitcoin