Tether Paid USD 267K in Ethereum Fees Last Month (UPDATED)
The most popular stablecoin, Tether is the largest payer of gas fees on the Ethereum blockchain, followed by a reported scam, then a cryptocurrency outside the Top 100 coins and is even larger than a major decentralized exchange, according to the ethgasstation.info data. (Updated at 13:05: updates in bold).
In the past 30 days, Tether paid USD 267,000 in fees, the gas price provider calculated.
This is more than 6 times the fees of the decentralized exchange IDEX, which paid USD 42,300 in the last month. The next coin on the ETH Gas Station's list is the controversial More Gold Coin with USD 100,000 in fees, which was in July suspected of increasing transaction fees on the Ethereum network and which the site warns may be a scam. The third on the list is Maximine Coin, ranked 109th by market capitalization, with USD 69,500 paid in 30 days.
While Ethereum developers are still working on the Ethereum 2.0 upgrade, which may solve some of its current problems, it’s experiencing capacity issues that were acknowledged by the Ethereum co-founder, Vitalik Buterin on multiple occasions.
“The Ethereum blockchain has been ‘almost full for years,’” he told Bloomberg this week. However, Buterin believes “it’s still good to develop apps, but anything substantial should be developed with scalability techniques in mind, so that it can survive higher transaction fees that would come with further growing demand for Ethereum,” adding that “in the longer term" Ethereum 2.0’s sharding "will of course fix these issues.”
Just recently, Buterin said that scalability, usability, account security and privacy are the blockchain’s current issues, and while the last three are improving, the scalability is “a big bottleneck because the Ethereum blockchain is almost full.” According to tracker Etherscan.io, Ether’s network utilization has risen to the 93.7% level, which may be an issue, said Buterin, because when utilization increases, so could transactions costs, and corporate users could hesitate to use Ethereum.
Tether’s use has been growing as more of the coin has been issued, with its current market capitalization standing above USD 4 billion, while at least 40% of all Tether runs on the Ethereum network, hence leaving less capacity for the developers.
"Although Tether issued on Ethereum has existed since late 2017, the number of Tether issued on it was low and was seldom used. This changed earlier this year, and the strong growth in Tether total supply can be almost all attributed to Ethereum," crypto market analysis firm Coin Metrics said in their newsletter today.
According to them, Tether growth on Ethereum could be motivated by several factors.
"Tether Limited, the administrator of Tether, could seek to reduce its continuity risk by reducing its reliance on the Omni platform (which is not under active development) and Bitcoin. The shift between Omni and Ethereum could also be driven by market demand. The primary use case for Tether is for active trading and arbitrage. For these use cases, Tether on Ethereum is faster (15 second blocks for Ethereum versus 10 minute blocks for Bitcoin) and require less fees. In addition, exchange deposit-withdrawal confirmation times are typically lower for Ethereum-based tokens compared to Bitcoin. Since these characteristics are desirable for active traders, Tether issuance on Ethereum should continue to grow relative to issuance on Omni," the firm explained.
Meanwhile, Jeff Dorman, chief investment officer of Arca, a Los Angeles-based crypto asset manager, told Bloomberg that some developers are waiting for the Ethereum network to increase its capacity, but are staying away until then, adding that “Tether isn’t helping”.
Reactions to claims that Ethereum is "almost full" varied. Trader Bitcoin Master found it to be a “non-story”, and that usage is more important than capacity, adding “Your favorite web service once conked out due to undercapacity. Key is finding solutions quickly”.
Eric Lombrozo, co-ounder of Ciphrex Corp, a company developing tools and application development platforms for cryptographic protocols, said that “Ethereum was an interesting, but wickedly deceptive experiment. It is difficult to extrapolate large scale behavior from how the network behaves when it is tiny and not in high demand,” adding that “the small-scale experimentation gives the false expectation that it will also work big.”
Lastly, it is *totally* fine for a scarce resource to be all used up. The question is whether the incentives promote economically sensible usage. The issue isn't that the resources are all used up but that the incentives are completely botched.— Eric Lombrozo (@eric_lombrozo) August 26, 2019
Meanwhile, Ethereum’s capacity and speed have been talked about a lot, but even more so in the recent days. Cryptonews.com reported about the disagreement Buterin had with CEO of Binance, Changpeng Zhao, wherein Zhao tweeted how these are no longer issues and have been largely solved, while Buterin claims they haven’t been solved at all. Meanwhile, in a recent research, Binance took a chance to praise its own blockchain, while criticizing other projects, Ethereum including.
At pixel time (10:00 UTC), ether trades at c. USD 187 and is down by almost 2% in the past 24 hours and by more than 5% in the past seven days.