IntoTheBlock takes a look at the many, many coins related to dogs that are bringing Ethereum transaction fees to new heights.
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Ethereum Fees Hit ATHs Amid Uncanny Dog-Token Frenzy
Ethereum has become notorious for its high fees during this bull market. For better or worse, Ethereum users have dealt with fees as high as $100 for simple ERC-20 token transactions. While these transaction fees typically price out retail users, there currently has been an outrageous amount of speculation surrounding dog-themed tokens on Ethereum.
Following DOGE-mania, Shiba Inu (SHIB) and similar tokens have attempted to steal the meme token’s spotlight, with one even being named Doge Killer (LEASH). These tokens — as ridiculous as they sound — have been seeing transaction volumes in the hundreds of millions of dollars as their prices defy gravity.
The parabolic returns have enticed retail users with many willing to spend triple digits in Ethereum gas fees to gamble on potentially higher profits. As a result, five out of the top ten trading pairs over the past 24 hours pertain to dog-related tokens, including DogeIon Mars (ELON)...
The high amount in trading fees for these pairs has resulted in the projected return on liquidity (ROL) for liquidity providers to currently be as high as 1,900% yearly. It is important to note, though, that these returns are likely to drop as either a) volumes (and therefore fees) drop or b) more liquidity providers enter the market diminishing the returns obtained on average. A mix of both of these is also likely.
The current dog-coin speculation — along with existing demand for decentralized applications — has led to record high fees on Ethereum. Over $89 million was spent on Ethereum fees on May 10.
Moreover, within a single hour Ethereum managed to accrue more fees ($5.78 million) than Bitcoin throughout the whole day ($5.71 million). Uniswap V2 was responsible for a high amount of the Ethereum fees with $6.85 million on May 10.
More often than not, these high fees are discussed as prohibitive for retail users given that day-to-day users may not be able to afford them. The current dog-token rally may prove to be the exception to the rule, likely due to traders projecting previous returns into the future.
While fees certainly need to decrease in order for broader mainstream adoption to take place, they also showcase the vast demand to use blockchain-based applications. This is the case as fees illustrate the willingness to pay for blockspace; given that the amount of transactions that fit within a block is limited, fees dynamically adjust based on demand.
Additionally, in the case of Ethereum, upgrades such as EIP 1559 seek to capitalize on high fees as part of transaction fees (referred to as the basefee) will result in ETH supply being burned. This is likely to lead to ETH’s supply becoming deflationary as usage and payments adoption on Ethereum grows.
Overall, the uncanny dog-token rally has reopened the debate of high fees being positive or negative for a blockchain. While it is certain that users are getting left out due to the high fees, the impressive demand to use blockchain applications does suggest higher adoption down the road, especially as scalability solutions become implemented.
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