Following the much-anticipated London network upgrade, Ethereum’s blockchain saw a nine percent increase in daily gas usage, surpassing 100 billion. A move like this is not a novelty for the second-largest crypto project to date, since Ethereum’s gas usage spiked numerous times, the latest being in April when the network gas usage skyrocketed 17% - from 80 billion to around 94 billion.
Ethereum’s co-founder Vitalik Buterin published a report with the reasons for the usage spike. According to Buterin, the gas usage spike can be roughly evenly split between three different causes - the ice age delay, pre-London blocks being not full, and imperfections in the base fee adjustment formula.
"Pre-London, average block times were ~13.5s, and post-London average block times are back down to their long-run normal level of ~13.1s. This is a ~3% difference in block speed, which explains 3% out of the 9% increase in on-chain gas usage.," Buterin noted.
Another 2-3 percent, Buterin added, come due to imperfections in the base fee adjustment formula. It turns out, during the transition from algorithmic to geometrical means, also adds to the gas usage increase.
"A 0% full block decreases the base fee by 12.5% (multiplies it by 7/8). A 100% full block increases the base fee by 12.5% (multiplies it by 9/8). So what happens if you have a 0% full block followed by a 100% full block? The base fee is multiplied by 63/64. Hence, for the base fee to remain constant, you actually need the average usage to be slightly above 50%.," Ethereum’s co-founder explained.
Meanwhile, Ethereum’s upgrade pushed asset managers into an ETH buying spree, with Grayscale, one of the largest digital asset managers to date, reported that currently is holding more than 3 million Ethereum with a total value of over $10 billion.
Grayscale seems to be intensifying its crypto asset-buying game, as the overall value of its cryptocurrency AUM (including Ethereum assets) reached $41.4 billion on 13 August 2021 - nearly 25% higher compared to $33 billion on 28 July 2021.
Furthermore, data from Glassnode shows that the ETH balance on leading digital exchanges has reached its lowest level in two years. The primary reason behind the outflow is Ethereum whales moving their assets from crypto exchanges to unknown digital wallets.
"Ethereum whale addresses aren’t stopping their accumulation as prices hover above $3,100. 3 years ago, addresses with 10k+ ETH owned 35.8%. Today, they own 43.7% of the number 2 market cap asset’s total supply. There are 1,338 of such addresses," Glassnode noted.
The gas usage spike, combined with the continuing bullish sentiment across the sector pushed Ethereum close to $3,300 per ETH, with a strong presence in terms of daily trading volumes.