The reason for the substantial increase in Avalanche network transaction fees is mainly due to the surge in the transaction volume of Crabada, the top GameFi project. More than 30% of the total network revenue may come from arbitrage robots on Crabada.
On April 26, Matt Mizbani, an investment partner of the well-known investment institution Paradigm, analyzed the reasons for the sharp increase in Avalanche network transaction fees on Twitter, mainly due to the surge in the transaction volume of the ecological head GameFi project Crabada, and estimated that 30% of the total network revenue of Avalanche network. % above may all come from arbitrage bots on Crabada. PANews translates the full text of its tweet below.
In the crypto world, there is often more behind data metrics than it appears. For example, the annualized transaction fee of the Avalanche network has been about 400 million US dollars, an increase of nearly 3 times since the beginning of the year. If ranked according to the total network revenue, Avalanche is already the third largest blockchain network, second only to Ethereum and BSC. . So what exactly happened?
Before delving into the reasons for the dramatic increase in transaction fees on the Avalanche network, let’s take a look at its fee mechanism. Avalanche draws on the EIP-1559 mechanism of Ethereum, that is, users need to pay two transaction fees, one is the basic fee set by the network according to the block space demand, and the other is a “tip”, which can make transactions prioritized. Avalanche also sets a minimum transaction fee, currently the minimum transaction fee is 25nAVAX (GWei), for example, the minimum transaction fee on a DEX is about $0.3. There was a time when network space was underutilized, but recently the demand for network block space has surged and the minimum fee has risen to around 30-60 nAVAX.
The main source of the above-mentioned increase in demand is Crabada, the leading GameFi project of Avalanche ecology, whose transaction volume continues to rise. Crabada was launched in November 2021. In the past six months, the proportion of its contribution fee to the entire Avalanche has gradually increased, and now it has exceeded 50%.
For example, on April 20, Crabada generated nearly $600,000 in revenue for Avalanche in one day, exceeding the overall revenue of public chains such as Bitcoin, Solana, Polygon, Fantom, and Terra during the same period.
According to the statistics of Paradigm researcher Anish Agnihotri, more than 25% of Crabada’s users are arbitrage robots, because these users have never rested for 8 hours when interacting with Crabada’s contracts. On April 20, the number of robot users in Crabada was 1,862, the total number of users was 6,760, and robots accounted for about 27.5%. In one day alone, the bots sent roughly 260,000+ transactions to Crabada, with a handful sending more than 1,000 transactions each, burning more than $1,000 worth of AVAX each. For example, this address contributed about $3,800 in fees in one day, and made a profit of about $2,300. (0xf52827737a3f05d550a41b184a5d8db4df63eb21)
Although these bots only account for more than 25% of the total number of users, they contribute 55% of Crabada’s total fees. On April 20, more than 30% of the total revenue of the Avalanche network may come from these bots, with an annualized fee of about 120 million Dollar.
During the same period, the top contracts calculated by fees on the Ethereum network on that day included OpenSea, Uniswap, Gem, etc. No single contract accounted for more than 15% of the fees.
With the launch of multi-chain and scaling solutions, developers and investors often guide their work and investments through data such as network fees, number of transactions, and number of users. Demand plays a more subtle role. As demand grows, platforms may make adjustments in fees, security, liquidity, or directly serve specific use cases, and these moves will affect not only demand but also how demand is best measured.
In other words, KPIs don’t always tell the whole story.
The tweet was also echoed by Avalanche co-founder Emin Gün Sirer, who said, “The above analysis is very good. An extremely popular Dapp will make other Dapps in the ecosystem seem weaker, and when there is an opportunity to make money, arbitrage bots will have nowhere to go. No. My concern is not whether Avalanche has enough popular apps or if they provide value to users, my concern is the destruction of AVAX.”
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/reasons-and-implications-for-avalanche-transaction-fees-skyrocketing/
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