Gate.io Blog Meme Coins Cause Ethereum Gas fees Jump: Mixed Views on Network Usability

Meme Coins Cause Ethereum Gas fees Jump: Mixed Views on Network Usability

06 May 11:09

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The gas fees for the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network increased by over 73% within the third week of April.

The rise in the demand for meme coins, XEN token and the activities of jaredfromsubway.eth bot contributed to the increase in the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network gas fee.

<a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network based layer 2 blockchains and EIP 1559 can reduce the network cost.

**Keywords**: meme coins, gas fees, network usability, liquidity mining, yield farming, <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network, $TROLL, $APED, $BOBO, Pepe the Frog, Gwei
## Introduction 
Gas fees influence the number of people that use a specific network such as <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>. This is the reason most networks strive to keep their transaction fees on a reasonable level. The <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain is one network that experiences surges in network fees.

In recent days, there was a sudden jump in <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network fees which created mixed feelings among its users and the crypto market in general. This article covers the causes of the recent <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network fee rise and the possible solutions to that problem. 
## What are gas fees? 
Gas is a charge levied on a transaction executed on a blockchain network such as <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>. The gas, also called transaction cost, is paid in the native coin of a network. For the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network users pay the gas fee using Ether (ETH) although it is denominated in Gwei which is equal to 0.000000001 Ether (ETH.

The exact amount of Gwei that a user pays on a transaction depends on the demand and congestion of the network. Currently, the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> gas fee comprises a base fee and a tip. The base fee is the amount of Gwei which the network sets for a transaction based on the network demand.

On the other hand, a tip is an additional amount which a user can set to incentivize the validators to approve the transaction faster than otherwise. A higher tip results in a faster transaction than a lower one.

Generally, many users choose to process their transactions when the gas fee is low. For example, the network is less congested during the weekends than during the weekdays. Therefore, some users prefer to process their transactions during the weekends. Also, there are software systems that tell when the gas is high and when it is low. 
## Recent spike in gas fees on the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network
The <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> gas fees reached its 10 month all-time-high during the third week of April when it clocked 43.641 Gwei, a level last seen in June 2022. Generally, the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network fee was high in 2022, with a peak of 150 Gwei in May. From that time it constantly decreased until it stabilized after the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> merge in September.

There are three key explanations for the recent surge in the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network fees. The first reason is the emergence of the meme coin craze driven by tokens such as $TROLL, $APED, $BOBO, and Pepe the Frog. Incidentally, these were among the top 10 spenders during April. 
![](https://gimg2.gateimg.com/image/article/16833424341.png)
Pepe meme coins- Miccom

As a result of the meme coin hype the average gas price rose from 60.82 Gwei on April 19 to 81.94 Gwei on 20 April. However, during the same period last year the average gas fee was 44.42 Gwei.

According to Anthony Sassano, an Independent <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> educator, the surge in network fees resulted in the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network generating revenue that was 28 times that of <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>. He also pointed out that the layer 2 <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network Arbitrum racked in more revenue than <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> as a result of the meme coin hype.

However, according to a software engineer on Twitter by the username @ Cygaar, the other cause of the 73% surge in the gas fees was the increase in demand for XEN, an ERC20 token, that used about “90% of the gas per block for single transactions.” Notably, the XEN token gas accounts for about 15% of the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network gas expenses.

The other assumed cause of the increase in the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> gas fees were the activities of a Maximal Extractable Value (MEV) bot responsible for trading meme coins on a large scale. For instance, this bot called jaredfromsubway.eth spent over 455 ETH about $950,000 as network cost within that period. Additionally, in the last two months, it spent 3,720 ETH as network fees when it performed over 180,000 transactions. 
## Market reaction to the increase in <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> Gas fees
The market reacted in mixed ways as some <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> proponents viewed the network fees surge as a sign of increased network usability. These people opined that as more people adopted the network its gas fees went up which generated more revenue.

However, some analysts have pointed out that the recent increase in the network fees is a result of the activities of a few players. For example, a Twitter user by the name [@ CryptoPannella said](https://twitter.com/CryptoPannella/status/1648941360651849728?ref_src=twsrc%5Etfw "@ CryptoPannella said"), “The extensive usage you’re talking about is a few thousand users gambling meme coins. I thought (and hoped) eth was supposed to be the future of finance.”

Definitely, the rise in the gas fees burdened the users. This is because in some cases they paid gas worth more than hundred dollars per single transaction. More unfortunately, other individuals paid network fees that were more than the value of their transaction amounts.

That is the reason why one Twitter user by the ID [@ 0xMQQ) said](https://twitter.com/0xMQQ/status/1648459788710461442?ref_src=twsrc%5Etfw "@ 0xMQQ) said"), “Try to buy a ~$20 NFT on eth, and the gas is ~$40. Some ppl say the infra operators deserve to be paid. Sure, but imagine paying visa $40 fee for buying a $20 digital good. Infra should be affordable.”
## How yield farming and liquidity farming drive the popularity of memecoins
Yield farming and liquidity mining have contributed to the high demand for meme coins. Although yield farming and liquidity provision are different they both involve locking a certain quantity of a cryptocurrency as an investment to earn a reward.

Therefore, some individuals have been investing in large quantities of meme coins through yield farming and liquidity mining. The reason is that many meme coins have low values enabling the investors to purchase large quantities. They invest through liquidity mining and yield farming because they often guarantee them a certain reward within a specific period such as three months. 
## Effects of high gas fees on users and developers
High network fees affect the level of participation of users and developers in the network. Basically, high gas fees mean that users have to pay large sums of money to effect the transactions.

As a result, most of them reduce the number of transactions they perform. Some of them migrate to other networks such as <a href="/price/tron-trx" target="_blank" class="blog_inner_link">TRON</a> or Cadano which have low transaction costs. When <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> users use other blockchains there will be a decrease in its trading volume and other activities like NFT minting. 
![](https://gimg2.gateimg.com/image/article/16833425492.png)
Popular networks people can use- Binance

When the gas fees for the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network increase the developers have several options. They may continue to use the network with the hope that its users will keep using it as they believe in its utility.

Alternatively, they can migrate to other blockchains which have lower transaction costs. Lastly, the developers on <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain may opt to use <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>’s layer2 blockchains such as <a href="/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a> and <a href="/price/avalanche-avax" target="_blank" class="blog_inner_link">Avalanche</a>. 
## Possible solutions to <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>’s high gas fees
One of the best solutions to reduce the gas fees is for the network to have more layer2 blockchains that compute transactions off the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain. Such blockchains will decongest the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain network, thereby reducing gas fees.

The EIP1559 can also help as it allows the users to determine the amount of gas fee they are willing to pay. Although they are supposed to pay the base fee, they may avoid the tip. 
## Conclusion 
During the third week of April the gas fees for the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network increased by more than 73% generating much revenue for the blockchain yet causing much pain among the users. The increasing demand for meme coins and the activity of a trading bot contributed to the rise in the <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network fees.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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Introduction

What are gas fees?

Recent spike in gas fees on the Ethereum network

Market reaction to the increase in Ethereum Gas fees

How yield farming and liquidity farming drive the popularity of memecoins

Effects of high gas fees on users and developers

Possible solutions to Ethereum’s high gas fees

Conclusion

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Meme Coins Cause Ethereum Gas fees Jump: Mixed Views on Network Usability

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