Meme token speculation raises on-chain fees to record highs

Speculation on meme tokens is escalating dramatically on the cryptocurrency market, influencing on-chain activity and transaction fees. This week, we delve into the performance of meme tokens and their impact on the blockchain ecosystem. Furthermore, how the anticipated Dencun upgrade will assist L2s in mitigating the sharply increasing fees caused by the recent meme coin mania will also be a subject of discussion.

During a robust crypto bull market, retail traders are gambling on riskier items, causing meme tokens to increase in value by an average of greatly over the previous month. The PEPE token led the climb with an incredible 600% monthly return, outperforming Ethereum-based tokens. 

Although PEPE has experienced a slight pullback, 91% of holders are still profitable, with only 170,000 holders compared to SHIB’s 1.3 million and DOGE’s 6.3 million. According to DeFiLlama, Solana-based tokens have a weekly DEX trading volume of about $15 billion, almost equal to Ethereum’s whopping $20 billion.

Ethereum transaction fees have surged to levels not seen in nearly two years due to the emergence of the meme coin mania; they now surpass $190 million per week, indicating an annual run rate in excess of $10 billion. The fee-burn mechanism of Ethereum depleted its supply by 33,000 ETH ($125 million) this week. However, most users have been deterred by the mainnet’s exorbitant transaction fees, which average $28. Simultaneously, since the upgrade of Nitro, the fees for Arbitrum, a well-liked L2 solution, have crossed $1.

The Dencun upgrade for Ethereum is scheduled for March 13. Proto-danksharding, or EIP-4844, will be implemented within his framework. Proto-danksharding implements blobs, a novel transaction type that significantly reduces the cost of data availability for L2s. 

As OP stack chains become more efficient, market forecasts indicate that the fees of the primary L2s will decrease by at least 80%. This upgrade will facilitate operations, with fees for activities such as USDC deposits on Aave potentially decreasing to $0.0091—a 27-fold reduction. Polymarket projections even expect a 60-fold reduction in L2 costs.

Although the precise magnitude of fee reductions after the Dencun upgrade is still uncertain, one thing is certain: a paradigm shift is imminent for the blockchain system. The implementation of these upgrades is anticipated to reduce the price of gas, which has risen as a result of the proliferation of social media tokens. Over time, this will lead to a cost-effective platform aligned with the requirements of layer two networks.  

Roxanne Williams

Roxanne Williams has recently joined as a market reporter for CryptoNewsZ - the 24/7 crypto news site, where she produces recent stories, technical analysis and price updates on world's leading cryptocurrencies.

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