Crypto Fees Comparison: Which Protocols Generate the Most Fees?!

Crypto fees: what are the most used protocols in the crypto space?

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Hey DEFI TIMES community,

What makes a blockchain valuable? - users, of course!

A blockchain without users is commonly referred to as a ghost chain. These chains claim to be Ethereum competitors, but they really aren’t. They claim to be faster, cheaper, more secure - they “solve” the blockchain trilemma!

But how do you know that a blockchain is actually being used? What’s the difference between a chain that reaches product-market fit and a ghost chain?

First of all, it’s important to note that no single blockchain has successfully solved the blockchain trilemma yet. Not Ethereum, not BSC, not Solana, etc.

That’s why no blockchain is fast, secure, and decentralized at the same time. That means when a particular blockchain is used a lot… block space is congested.

And when block space is congested…  fees tend to be high!

Transaction fees are one of the most important metrics to look at when you evaluate whether a project is being used.

Now, let’s take a look at the protocols that generate the most fees. Remember: 

Fees = Usage

And it seems like we have a clear winner here!


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Analyzing Crypto Fees

Comparing Crypto Fees

Now, let’s take a look at the ten largest crypto projects. As you can see, we have a clear winner here: Ethereum! Ethereum is by far the biggest fee-generating protocol in the world. I think you would have guessed it. However, there is one interesting thing to note: The 2nd place deoes’t belong to Bitcoin - it belongs to Uniswap!

Of course, Uniswap didn’t quite overtake Bitcoin by far - Bitcoin still exceeds Uniswap in fees when you consider the 7-day average. But the fact that a single protocol on Ethereum surpassed Bitcoin in fees is a statement!

Bitcoin defends the 3rd place very well though. Within a single day, Bitcoin generates over $5 million worth of fees. Ethereum, on the other hand, generates ten times more fees within a single day: $50 million.

Apart from Uniswap, six other Ethereum based protocols grab their place in the top 10:

  • Aave

  • SushiSwap

  • Compound

  • MakerDAO

  • Balancer

  • Bancor

The clear winner is Ethereum!

Dogecoin, which is on rank 10, doesn’t change that. But why is that so? Why does Ethereum surpass Bitcoin by far when it comes to crypto fees?

Well, the answer comes down to one single truth: Ethereum is used more often than Bitcoin.

In fact, Ethereum is supposed to be used more frequently… and Bitcoin is designed to be used less!

Fees are a crucial metric while determining whether a blockchain has actually achieved product-market fit. One important thing to note is that different blockchains/projects fulfill different use cases - that means the number of transactions can vary.

Let’s go through the platforms with the most users to see how usage differs.

Bitcoin is not designed to be used a lot

Bitcoin only has three main purposes:

  1. Store of Value

  2. Medium of Exchange 

  3. Unit of Account

Only one of them requires you to take action: Medium of Exchange. That means people only use Bitcoin to transfer value. Bitcoin is not designed to do fancy things; it literally only has one use case!

People don’t use Bitcoin as much as they use Ethereum, for example. On Ethereum you can do literally anything - there are no boundaries. Bitcoin, on the other hand, is not Turing-complete, which means that programming possibilities are limited.

Keep that in mind when we analyze how much fees Bitcoin generates. Less usage means fewer fees - Bitcoin is designed to be used less than other blockchains… which brings us to Ethereum!

Endless possibilities mean endless transactions

Ethereum is Turing-complete; you can program anything you want on it. That means Ethereum is literally flooded with applications and users. In contrast to Bitcoin, Ethereum not only has three purposes: it has unlimited possibilities. Ethereum is a general-purpose blockchain, which means that programmers build all kinds of apps and protocols on it.

In total, Ethereum is designed to be used a lot more frequently than Bitcoin. How many times have you used Bitcoin in comparison to Ethereum? The only time you send BTC is when you change its location or purchase an item. Ethereum users have many more occasions to utilize the blockchain: They can save, send/exchange tokens, stake, borrow, lend, and bet.

On Ethereum, we are replicating the central financial system - only a lot faster, cheaper, and more efficient.

Bitcoin is digital gold; Ethereum is the digital economy.

Comparing the total amount of transaction fees of both blockchains doesn’t show the full picture. If you only looked at the fees, you would think that Ethereum has left Bitcoin behind - by far!

However, this is not true because Bitcoin isn’t designed to be used much - And this is by default!

Applications Are the Reason Ethereum Exists

Apart from Bitcoin and Ethereum, DeFi protocols are the third big category of fee-producing protocols. They generate two kinds of fees:

  • Gas fees

  • Protocol fees

For example, a Uniswap user has to pay Ethereum gas fees because Uniswap runs on Ethereum; every Ethereum transaction requires gas paid in ETH to be processed. In addition, Uniswap needs an inherent fee mechanism to incentivize participants. Currently, Uniswap liquidity providers (LPs) receive all the fees. Without these fees, no one would provide liquidity to Uniswap as there would be no compensation for the locked-up assets.

Most Ethereum protocols have an inherent fee system:

  • MakerDAO

  • Aave

  • Compound

  • Uniswap

  • Synthetix

  • And many more

Of course, having two kinds of fees makes these protocols expensive; however, it incentivizes participation and usage.

Just as Ethereum, these protocols are either used or they die - in contrast to Bitcoin. Ethereum based protocols only survive because of their users. That justifies their place in the top ten most used protocols in the world.

Conclusion

Ethereum has flipped Bitcoin in fees - by far! That doesn’t mean that Ethereum should be valued more than Bitcoin (although it could?!).

It ultimately comes down to the fact that Ethereum is designed for people to use it. While people use Bitcoin only for one reason: transferring value.

Average Bitcoin users use the blockchain very rarely - average Ethereum users utilize Ethereum several times per week (if not every day).

That’s how Ethereum and Uniswap generate way more fees than Bitcoin…

...and this is by default!


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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.

Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.