|BTC transaction fees|
Buterin didn’t predict the rise of NFTs, and has watched the phenomenon with a mixture of interest and anxiety. ... their volume has overwhelmed the network, leading to a steep rise in congestion fees, in which, for instance, bidders trying to secure a rare NFT pay hundreds of dollars extra to make sure their transactions are expedited.Last Saturday evening I looked at Molly White's invaluable timeline Web3 is going just great and saw that the top two entries summed up this problem to a tee. Below the fold, I explain
The top entry was entitled Popular NFT mint spikes Ethereum gas prices; OpenSea transaction fees exceed $3,500:
The much-awaited Bored Ape Yacht Club "Otherside" metaverse land sale began, and its popularity just about wrecked Ethereum for everyone else. Gas fees, which increase based on network congestion, spiked to shocking levels, with an average OpenSea sale costing more than 1.25 ETH ($3,500) in gas.About a 26% transaction fee, which makes the "extortionate" fees credit cards charge look affordable.
Most trading on OpenSea during this period was for the much-anticipated Otherside land deeds, which sell for around 5 ETH ($13,500) plus gas.
one person who bought a 0.1 ETH ($275) NFT and paid $3,850 in transaction fees.A 1,400% transaction fee.
So Buterin is right that something needs to be done to make transactions cheaper. But wait! The second entry in White's timeline was entitled Solana goes down again:
On April 30, NFT minting bots began flooding the Solana network with 4 million transactions per second, causing the network to lose consensus. The project tweeted that "Engineers are still investigating why the network was unable to recover, and validator operators prepare for a restart." The network was offline for several hours.As Solana has discovered, if transactions are very cheap, the network will be flooded with them and, as Solana did, collapse under the load. The cheap transactions effectively enable a DDoS attack on the network.
This is hardly the first instability the network has demonstrated, much to the chagrin of its users. Transaction flooding is an issue on Solana in part because of the low transaction fees compared to networks like Bitcoin and Ethereum, which have relatively high gas fees that would make flooding extremely expensive.
The motto of this story is "be careful what you wish for".
Molly White reports on another instance of low transaction fees enabling a blockchain to be DDoS-ed in Zcash continues to suffer from spam attack that started months ago:
"Since June or July, the network has been suffering from a spam attack in which attackers have been submitting massive transactions that quickly fill up block space. The chain has exploded in size, nearly tripling to more than 100GB since the attack began. Unlike other chains which are prohibitively expensive to attack, each spammed transaction costs less than a cent, and the attacker is estimated to be spending roughly $10 a day to execute the attack."
David Thomas asks Are Monero Developers Behind the Latest Zcash Attack?:
"While the motive of the attack has not yet been determined, bax1337 of Convex Labs believes that the goal is to bring Zcash into disrepute through nodes failing because of memory, performance, and synchronization issues. Additionally, potential node operators could be discouraged from participating in the network, making the blockchain susceptible to surveillance or so-called Eclipse attacks."
Ethereum user pays 64 ETH ($118,000) transaction fee on 84 ETH ($155,000) swap by Molly White captures the insanity:
"A recent surge in ￼memecoin popularity has caused Ethereum ￼transaction fees to skyrocket. One trader paid the price, eating a 64 ETH ($118,000) transaction fee just to perform a simple swap of 84 ETH to another token."
And Bitcoin's average fee per transaction is currently about $30. At the end of last month the average cost as a percentage of transaction volume was around 3%, nearly as much as the highest credit card merchant fees.
Cryptocurrency transactions are only affordable when no-one else wants to transact. When everyone does ...
Just as they did to Ethereum, NFTs are spiking transaction fees for Bitcoin, as Sidhartha Shukla and David Pan report in Memecoin Mania and NFTs Bring a ‘Seismic Shift’ for Bitcoin Mining:
"An eruption of memecoins and nonfungible tokens on the Bitcoin blockchain has reshaped the revenue profile of miners and stirred questions about how lasting the upheaval will prove to be.
The NFT and meme-token craze spurred record transactions and an ensuing fee windfall for miners, who run the computers underpinning Bitcoin. At one point in May, transaction fees made up over 40% of revenues, whereas miner income is usually dominated by the new Bitcoin they get for securing the blockchain."
How long will this last? Not long. Average fees per transaction were $3 on 30th April, hit $30 on 6th May, on 20th May they were $4.
"For now, Ordinals is helping to fuel renewed investor enthusiasm for Bitcoin miners. The 20-member MVIS Global Digital Assets Mining Index is up 110% so far in 2023, outstripping Bitcoin’s 74% advance.
The application of ordinals is “completely rewriting how people think about mining profitability,” said Colin Harper, head of content and research at crypto-mining services provider Luxor Technologies."
Good luck with that.
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