In recent times, the Ethereum network has been experiencing a surge in transaction fees, reaching levels that have not been seen since May 2022. As per a report from Hildobby, a pseudonymous data analyst at VC company Dragonfly, Ethereum network fees surged to around 87 gwei on May 2nd. This increase in transaction fees is attributed to the rise in the popularity of memecoins. Memecoins are digital assets inspired by famous memes, which have gained considerable traction within the crypto community because of their distinct branding and marketing techniques.
The recent spike in memecoin popularity may be contributing to the high transaction fees. This new breed of digital assets has been gaining traction and popularity rapidly, leading to speculative interest within the crypto market. For instance, Pepe, a memecoin whose price has risen about 38,900% since its introduction on April 14th, sparked a social media craze and experienced a surge in price by 266 times in just four days last month. However, many of these tokens lack liquidity or market depth, making them vulnerable to sharp price swings.
As the Ethereum network struggles with increased on-chain activity, the median average transaction fee on Ethereum has risen to its highest level since May 2022. Nevertheless, some EVM-compatible blockchains such as BNB Chain, Polygon, and Avalanche, which have cheaper transaction costs than Ethereum, reached all-time highs last week. Despite the surge in memecoin popularity, Binance CEO Changpeng Zhao recently revealed in a Twitter Spaces engagement that he does not understand memecoins, and the listing choices are made by a different team.
BNB Chain, Polygon, and Avalanche are EVM-compatible blockchains. Transaction costs on these networks are often cheaper than those on Ethereum.
Moreover, the much-anticipated Ethereum's Shanghai blockchain upgrade, also known as “Shapella,” is among the reasons behind the recent spike in transactions on this blockchain. Shapella, which is expected to launch this year, is a network upgrade that is intended to boost Ethereum's scalability and enhance the overall user experience. The upgrade will introduce several improvements to the Ethereum network, including a more efficient consensus mechanism and improved transaction throughput. Thus, the Ethereum network is expected to experience further growth in the future, with the upcoming upgrade expected to facilitate increased adoption and usage of Ethereum's blockchain.