Meme Coin Speculation Drives On-Chain Fees to Yearly Highs
And how Dencun will improve fees on L2s
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This week we dive into the rise in meme token speculation and the resulting impact in on-chain activity. We evaluate the top performing meme coins, sharing some key statistics on the space. Finally, we discuss how the upcoming Dencun upgrade will help L2s alleviate their recently high fees due to the recent meme coin frenzy.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- Bitcoin fees more than doubled with Ordinals-related transactions hitting a monthly high
- Fees on Ethereum reached their highest since May 2022, with meme token speculation being one of the key drivers as we’ll discuss further
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Bitcoin recorded negligible inflows into exchanges following $1.3B of outflows in the last two weeks
- $300M worth of ETH was deposited into CEXs on net breaking a streak of eighth straight weeks of outflows
Meme Coin Speculation Drives On-Chain Fees to Yearly Highs
The crypto bull market continues and is beginning to show signs of retail traders being back. As Bitcoin hits new all-time highs, investors are taking riskier bets, particularly in meme tokens, which have on average increased by 3x over the last month (based on the tokens below).
600%+ Returns — PEPE leads the highest monthly returns among established meme coins on Ethereum
- Following the recent run-up and slight correction, 91% of PEPE holders are currently profiting on their positions
- 170k addresses currently hold PEPE at the moment, which is still significantly lower than SHIB’s 1.3M and DOGE’s 6.3M holders
- The recent meme token speculation has also expanded to tokens on Solana, where a total of $15B was traded on DEXs this week, almost as much as the $20B on Ethereum per DeFiLlama data
The increased speculation in the market has led fees on Ethereum to reach their highest in nearly two years.
$10B Run-Rate — Ethereum’s $190M+ in weekly fees puts it at annualized rate of over $10B for the first time since early 2022
- Due to Ethereum’s fee-burn mechanism, ETH’s supply has decreased by 33k ETH (~$125M) this week
- While this is positive for ETH holders, on the other hand, the average transaction fee on Mainnet this week was of $28, making it unusable for many
- On the Arbitrum layer 2 (L2), the average fee climbed above $1 for the first time since June 2022, prior to the Nitro upgrade
Fortunately, the increased gas prices on L2s should become alleviated next week following Ethereum’s Dencun upgrade.
Ethereum’s Dencun Upgrade
Ethereum is set to undergo its Dencun upgrade next Wednesday, March 13. In it, EIP-4844 (also known as proto-danksharding) will be implemented. Proto-danksharding introduces a new type of transaction, called blobs, which will data availability for L2s an order of magnitude cheaper.
5x Cheaper L2s (or more) — Market projections point to the main L2s having their fees reduce by at least 80%
- OP stack chains will be upgraded one day after the Dencun upgrade, introducing data blobs through this
- Estimates for the fees for depositing USDC on Aave are as low as $0.0091, representing a 27x decrease
- Based on Polymarket, the reduction in costs for L2s could be as large as 60x
Overall, there is still some uncertainty on the exact fee reduction that will come as a result of the implementation of the Dencun upgrade. However, it is evident that the gas costs emerging from meme token frenzies are likely to be substantially lower in L2s at least in the near future.
