DeFi fever continues unabated, Bitcoin on-chain transaction fees are rising

Bitcoin has not missed out on the recent rise in crypto market prices, but its on-chain transfer fees have also risen significantly, just like Ethereum network fees, giving users a less-than-optimal transfer experience.

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Bitcoin fees are rising again, approaching levels seen during the recovery from the crypto market crash in March 2020. On Thursday, the average on-chain Bitcoin transaction fee reached $3.841 per transaction, up 151% from Sunday. Since then, fees have fallen slightly; yesterday, the average cost per Bitcoin transaction was $2.9, according to BitInfoCharts.

DeFi activity on Ethereum has injected new vitality into the entire crypto industry, and the surge in Bitcoin transfer fees may mean that the continued high level of DeFi activity on the Ethereum network will also spread to other blockchains, as Ethereum and DeFi will lead the next crypto bull market.

Transfer fees are related to the activity of the Bitcoin network, so when a large number of users are buying or selling Bitcoin, transfer fees will rise.

The last time Bitcoin transaction fees spiked significantly was in May this year, when the price of Bitcoin rose from $7,900 to about $10,000 in more than a month. The Bitcoin network was most congested on May 20, when the average cost of broadcasting a Bitcoin transaction exceeded $6.6.

Bitcoin on-chain transfer fees reached their highest level ever in the last few days of 2018, when the ICO craze was at its peak and the price of Bitcoin was approaching 500 billion. The average transaction fee reached a staggering $54 per transaction.

Historical chart of average transaction fees on the Bitcoin chain. Source: Bitinfocharts

Rising prices and network activity in the crypto market may be driven by the DeFi boom on Ethereum. In order to increase the funds that DeFi customers use for loans and token swaps, many protocols are distributing governance tokens as rewards for locking cryptocurrencies in protocols such as Compound and Balancer. As a result, Ethereum is attracting a large number of new users, and the transaction volume on its network is approaching the limits of the current Ethereum architecture.

As the first cryptocurrency to appear and gradually become known to the public, Bitcoin has always been the leader in the entire encryption field.

The increase in Bitcoin network activity is a positive sign, but for an industry that is being touted as a low-fee alternative to traditional banking, current fee levels may put off many potential users. The industry's need for technological advancement is becoming more and more urgent. But it is clear that a heavyweight solution, Ethereum 2.0, is not far away.