Meme Tokens Drive Ethereum Fees to Two-Year High

The surge in network activity driven by the meme coin frenzy benefits Ethereum investors through rapid deflation, yet complicates blockchain usage, according to a study by IntoTheBlock.

In this week’s newsletter, we explore the rise in meme token speculation and how the upcoming Dencun upgrade will impact Ethereum fees.?https://t.co/xVh8pz1Pxh

— IntoTheBlock (@intotheblock) March 9, 2024

According to analysts, from March 2 to March 9, Ethereum’s mainnet fees reached $193 million, marking the highest level since May 2022. Over the week, the figure increased by more than 78%.

This activity is largely driven by a new wave of meme token popularity and increased speculative trading, experts noted. Over seven days, coins like SHIB, PEPE, and FLOKI rose in price by 35%, 30%, and 95%, respectively.

According to DeFi Llama, trading volumes on decentralized Ethereum exchanges simultaneously jumped by 40% to $20 billion.

Analysts added that due to the fee-burning mechanism, the supply of ETH decreased by 33,000 ETH (~$125 million) this week.

“While this is positive for Ethereum holders, on the other hand, the average transaction fee on the mainnet this week was $28, making the network unsuitable for many users,” added IntoTheBlock.

Experts predict a reduction in fees in L2 solutions following the Dencun upgrade, scheduled for March 13. A key component of the hard fork is EIP-4844, which includes the Proto-Danksharding option for scaling.

“Overall, there remains some uncertainty regarding the fee reduction that will occur after the Dencun upgrade. However, it is clear that gas costs resulting from the meme token frenzy are likely to be significantly lower in L2, at least in the near future,” researchers concluded.

Previously, meme coins with spelling errors like Jeo Boden, Danold Tromp, and Olen Mosk sparked a buying frenzy among Solana users.

Earlier, analysts at K33 Research saw the meme coin rally as a sign of an emerging altseason.