The reason for the sharp 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 substantial 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 It is
estimated that more than 30% of the total revenue of the
Avalanche network may come from arbitrage bots on Crabada. PANews
translates the full text of its tweet below.
In the world of encryption, 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 we explore 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 demand increase is Crabada,
the leading GameFi project of Avalanche, 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 it currently exceeds
50%.
For example, on April 20, Crabada generated nearly
$600,000 in revenue for Avalanche in one day, more than the same
period
Bitcoin, Solana,
Polygon, Fantom, The overall revenue of public chains such as
Terra.
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
expenses. On April 20, more than 30% of the total revenue of the
Avalanche network may come from these bots. The annualized expense
is approximately $120 million.
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 accounts for more than 15% of the cost.
With the launch of multi-chain and scaling solutions,
developers and investors often guide their work and investment
through data such as network fees, number of transactions, and
number of users. It can be seen that the demand for block space
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, when the
opportunity to make money arises. , arbitrage bots will be
everywhere. My concern is not whether Avalanche has enough
popular applications, or whether they provide value to users, my
concern is the destruction of AVAX.”
source: The reason and inspiration of Avalanche transaction fees "swelling"
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