Solana-based platforms have made notable strides in competing with Ethereum. On Oct. 21, decentralized exchange Raydium surpassed Ethereum in 24-hour fee revenue, bringing in $3.4 million compared to Ethereum’s $3.35 million. This comes as Ethereum continues to navigate the impact of its March Dencun upgrade, which significantly reduced transaction fees. Just a day later, the Scroll layer-2 network’s airdrop drove up Ethereum blob fees to a four-month high of $4.52.
Scroll Airdrop Sparks Surge in Ethereum Blob Fees to $4.52 Amid Governance Token Listing on Binance
The highly anticipated airdrop of SCR, the governance token for the Ethereum layer-2 network Scroll, sparked a surge in blob fees on Oct. 22, briefly driving the cost to a four-month high of $4.52. This surge marked the third significant spike in blob fees since Ethereum’s Dencun upgrade earlier in the year.
The spike in fees came as thousands of users flocked to claim the SCR tokens, which were distributed as part of the airdrop and later listed on the cryptocurrency exchange Binance. According to pseudonymous crypto data analyst Hildobby, who posted the observation on X, ”Scroll airdrop claimers just triggered the blob market, they’re no longer free.” The analyst attributed the surge directly to the airdrop’s impact on Ethereum’s layer-2 ecosystem.
Blob fees are associated with the cost of ”blobs,” a data storage mechanism introduced during Ethereum’s Dencun upgrade in March 2024. The upgrade, which included proto-danksharding, aimed to reduce transaction costs on Ethereum’s layer-2 networks. Blobs function as temporary data storage units that allow for more efficient and cost-effective transactions. When demand for blob usage surges, fees can rise significantly, as evidenced by the spike during the Scroll airdrop.
The uptick in blob fees on Oct. 22 was not an isolated event; rather, it was the third such occurrence since the Dencun upgrade. Previous spikes in blob costs occurred during a surge in layer-2 activity in July and earlier during the launch of Blobscriptions on March 27. Blobscriptions introduced a protocol that enabled users to inscribe data directly onto blobs, leading to a temporary fee increase at the time.
While blob fees are typically low, the surge to $4.52 represented a significant escalation in transaction costs for users. According to data from Dune Analytics, the rapid increase in blob fees coincided with heightened activity across Ethereum’s layer-2 networks, as users sought to claim the newly airdropped SCR tokens. As the rush to claim tokens subsided, blob fees retraced quickly, returning to near-zero levels.
The increase in blob fees poses both benefits and challenges for the Ethereum network. On one hand, higher fees result in greater amounts of blob gas being paid back to the network, potentially increasing revenue for validators and contributing to network security. On the other hand, elevated blob costs translate into more expensive transaction fees on layer-2 networks, potentially deterring users from engaging in on-chain activities.
For Ethereum, which has been striving to maintain low transaction costs on its layer-2 networks, this spike in fees is a reminder of the scalability hurdles that still need to be addressed. The temporary fee increase highlights how network activity surges, such as popular token airdrops, can strain Ethereum’s capacity and result in costlier transactions.
The surge in blob fees comes less than a month after Ethereum co-founder Vitalik Buterin expressed concerns about the ”blob count” nearing full capacity. In a Sept. 27 post on X, Buterin cautioned that if the maximum number of available blobs per block continued to approach its limit, Ethereum’s scalability could stall without intervention.
In response to these concerns, Ethereum developers announced a new Ethereum Improvement Proposal (EIP-7742) on Oct. 18. This proposal aims to optimize the network by dynamically setting the blob gas target and maximum values, allowing for greater flexibility in handling blob-carrying transactions. The adjustments are expected to be implemented in the upcoming Pectra fork, with the goal of enhancing Ethereum’s scalability and minimizing future fee spikes.
The Dencun Upgrade: Blobs and Proto-Danksharding
Blobs and proto-danksharding were introduced as part of the Dencun upgrade, which went live in March 2024. These changes were designed to lower transaction costs on Ethereum’s layer-2 networks by providing an efficient data storage solution. The implementation of blobs allowed for temporary data storage, reducing the amount of data that needed to be permanently stored on the Ethereum mainnet. This innovation led to a significant drop in fees across various layer-2 networks. For instance, swap fees on Arbitrum fell from around $1.25 to below $0.02, while Polygon fees saw a similar reduction.
One particularly striking example of the cost-saving potential of blobs was demonstrated by Ethereum developer Dan Cline, who inscribed the entire ”Bee Movie” script onto the Ethereum mainnet for just $14.
The introduction of EIP-7742 represents a proactive approach to addressing the ongoing scalability challenges posed by the blob mechanism. By allowing the Ethereum consensus layer to dynamically adjust blob gas targets, the proposal aims to prevent future congestion and fee spikes during periods of high network activity. Christine Kim, vice president of research at Galaxy Digital, noted that the EIP would be a key part of the upcoming Pectra fork.
Raydium Surpasses Ethereum in 24-Hour Revenue as Solana Ecosystem Gains Momentum
Meanwhile, in a major development for the decentralized finance (DeFi) sector, the Solana-based decentralized exchange (DEX) Raydium outperformed Ethereum in 24-hour fee revenue on Oct. 21. According to data from DefiLlama, Raydium generated $3.4 million in fees over the course of the day, surpassing Ethereum’s $3.35 million.
Raydium, the most popular and liquid DEX on the Solana network, has established itself as a major player in the DeFi landscape. The platform boasts approximately $1.8 billion in total value locked (TVL), making it a key hub for decentralized trading and liquidity provision within the Solana ecosystem. By generating $3.4 million in daily fees on Oct. 21, Raydium not only outpaced Ethereum but also highlighted the increasing activity and user engagement across Solana-based DeFi protocols.
Solana’s rise has been bolstered by its high-speed, low-cost transactions, which have attracted users and developers looking for alternatives to Ethereum’s more expensive fee structure. The network’s ability to handle a high throughput of transactions has enabled it to accommodate the surging demand for decentralized exchanges, NFT marketplaces, and other DeFi applications, driving up activity and revenues.
The recent success of Raydium comes against the backdrop of Ethereum’s ongoing recovery from a sharp drop in network revenue following the Dencun upgrade in March 2024. The upgrade aimed to reduce transaction fees on Ethereum by approximately 95% through the introduction of blobs and proto-danksharding, which enabled more efficient data storage and transfer processes on the network. While the fee reduction improved user experience and lowered costs for transacting on Ethereum, it also resulted in a significant decline in protocol revenue.
Despite the temporary setbacks, Ethereum remains one of the most dominant blockchain networks in terms of transaction volume and fee generation. The network consistently outperforms other blockchains like Solana in terms of overall activity, even as it occasionally falls behind specific protocols such as Raydium in daily revenue. The Oct. 21 revenue figures reflect this dynamic, with Solana itself generating $2.67 million in revenues, still slightly trailing Ethereum’s earnings for the same day.
Raydium’s achievement is not an isolated incident; it is part of a broader trend of Solana-based platforms occasionally surpassing Ethereum in revenue generation. Another notable example is the memecoin creation tool Pump.fun, which has outperformed Ethereum in 24-hour revenue multiple times. On July 29, Pump.fun generated more fees than Ethereum, driven by the popularity of memecoin trading on Solana. This was not the first time Pump.fun eclipsed Ethereum; the platform had previously reached an all-time high of nearly $2 million in daily revenue on June 30, narrowly surpassing Ethereum’s $1.91 million on that day.
The growing frequency of Solana-based protocols outpacing Ethereum in short-term revenue metrics suggests that Solana’s ecosystem is becoming more vibrant and competitive. Factors contributing to this shift include lower transaction fees, faster settlement times, and a user-friendly experience that appeals to a broad range of DeFi enthusiasts and developers.
Since its inception in 2015, Ethereum has generated approximately $3 billion in transaction fees, denominated in Ether (ETH). The network’s fee structure includes mechanisms such as “burning,” where a portion of transaction fees is permanently removed from circulation, and rewarding stakers who provide collateral to secure the network by posting ETH. These mechanisms help accrue value to ETH holders and drive the economic model of Ethereum.
Matthew Sigel, head of digital asset research at VanEck, offered an optimistic outlook for Ethereum’s future revenue potential. In September, he projected that the network could generate up to $66 billion in annual free cash flow by 2030. This expectation is based on the assumption that Ethereum will continue to capture a significant portion of global transaction processing, potentially driving the price of ETH as high as $22,000 per token. According to Sigel, ”Ethereum processed roughly $4 trillion in settlement value over the last year and another $5 trillion in stablecoin transfers annually. So this is far bigger than PayPal and is beginning to approach networks like Visa.”
Solana’s Strategy: Scaling Through Speed and Low Costs
Solana’s blockchain has gained traction due to its scalability, which enables high transaction throughput with minimal fees. The network’s consensus mechanism, based on Proof of History (PoH), allows it to achieve transaction speeds far exceeding those of many other blockchains. This advantage has made Solana an attractive platform for developers building DEXs, lending protocols, and NFT marketplaces.
Raydium’s ability to surpass Ethereum in daily revenue is evidence of Solana’s successful approach to scaling. The network’s combination of speed, low fees, and developer-friendly tools has fostered a vibrant ecosystem where decentralized applications can thrive. As Solana continues to grow, its DEXs and other DeFi platforms are likely to attract more users, liquidity, and innovative projects, further enhancing its competitive standing against more established blockchains like Ethereum.
While Raydium’s revenue triumph on Oct. 21 demonstrates the growing prominence of Solana-based DeFi, Ethereum’s long-term prospects remain strong due to its foundational role in the blockchain ecosystem. The network’s extensive developer base, robust security, and continued advancements, such as the Dencun upgrade and upcoming EIPs, position it well for sustained growth.
Nevertheless, the competition between Ethereum and newer blockchains like Solana is intensifying, with emerging platforms challenging the status quo by offering lower fees and faster transactions. The ability of protocols like Raydium and Pump.fun to periodically surpass Ethereum in fee revenue illustrates the shifting dynamics of the DeFi space, where user preferences and technological innovations are rapidly evolving.
This article was originally Posted on Coinpaper.com
