The on-chain data platform IntoTheBlock recently reported that the Ethereum (ETH) network’s revenues saw a significant increase this week. The network revenue nearly reached the highest level in the last two years, particularly due to the increase in speculative activity surrounding memecoins.
Network Becomes Inaccessible for Many Users After Memecoin Rally
IntoTheBlock‘s data indicates that Ethereum‘s main network revenue from transaction fees rose to $193 million this week. This figure is the highest since May 2022 and represents a significant 78% increase from the previous week. The increase in on-chain activity is largely attributed to the speculative price surge surrounding memecoins such as Pepe (PEPE), Shiba Inu (SHIB), and Floki (FLOKI), which are built on the Ethereum network and saw their prices more than double last week.
In addition to the increased activity of memecoins, data provided by DefiLlama shows that the trading volume on decentralized exchanges (DEXs) built on the Ethereum network increased by 40% this week, reaching $20 billion, marking a notable climb.
However, despite potential pitfalls for ETH holders, the increased activity on the Ethereum network has made it quite expensive for users. According to IntoTheBlock, the average transaction cost, known as the network fee, rose to $28 this week, rendering the network “unusable” for many users.
Furthermore, there was a significant increase in transaction fees on Layer 2 networks designed to scale the Ethereum network and alleviate congestion, with fees on the Arbitrum network reaching $1, the highest level since 2022. The upcoming Dencun update, planned for next week, is expected to significantly reduce transaction fees on Layer 2 networks.
33,400 ETH Removed from Circulation
On the other hand, investors holding Ethereum’s native asset, ETH, continue to benefit from the network’s token burning mechanism due to increased network activity. Following Ethereum’s update known as The Merge, which transitioned from Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism, the network continues to effectively reduce its supply by burning a portion of the transaction fees paid by users.
According to data from Ultrasound.money, last week alone, the supply of ETH decreased by approximately 33,400 units, worth about $130 million at current prices. In other words, a portion of ETH’s circulating supply amounting to 33,400 units was burned and removed from circulation. This has rendered ETH deflationary at an annual rate of -1.45%.
