When comparing Bitcoin fees and transaction outputs, many tend to focus on the “average” metrics opposed to the macro picture. We take a look at Bitcoin total fees paid and total transaction counts compared to Ethereum and XRP. XRP continues to be the outlier, showing much smaller total fee growth, yet facilitating 3X more in total transaction counts compared to Bitcoin and Ethereum.
Bitcoins Environment
Even before Bitcoins 3rd halving that occurred earlier this month, investors have been watching Bitcoins fees. Despite Bitcoin performing very well this year compared to the global economy, the actual utility behind it has been in question. Bitcoins future continues to look more appealing in the “store of value” space opposed to an actual payment protocol. Post halving, Bitcoins fees have continued to surge more than 140% , and hash rate has fallen precipitously. The mempools continue to be congested, consumed by pending transactions that are waiting to be confirmed by miners. With miner revenues getting slashed in half, this now increases the chances of miners ignoring low fee transactions and dedicating their time to transactions that are willing to pay a higher premium. Therefore, costs continue to surge.
Total Fee Growth In 2020
Opposed to looking at “average fee per transaction” we take a look at the macro picture. We do this by assessing the collective fees paid year to date. Total fees paid is collected from January 2020 through May 2020. The figure below displays the growth for Bitcoin, Ethereum, and XRP. For example, in January 2020, there was around $71,000 in total fees on the Bitcoin network. As of May 2020, total fees sit right around $657,000. This represents a +825% growth in total fees on the Bitcoin network. Ethereum saw a similar growth trajectory, but XRP was a small fraction compared to Bitcoin, accounting for only 3.76% of Bitcoins total fees YTD.
Total Transaction Count
Again on a macro scale, we then take a look at total transaction count. Opposed to looking at “average daily transactions,” we assess total transaction counts year to date. Between January 2020 and May 2020, XRP was the outlier, having a total transaction count north of 143 million. This was nearly 3X more in total output than Bitcoin.
In terms of utility, XRP is a complete market outlier right now. Total fees paid have grown at a fraction of Bitcoin and Ethereum, yet it’s producing at 3X. Traders and investors have been capitalizing on these opportunities. During times of high network congestion, it was stated that Bitcoin and Ethereum are being swapped out for XRP. XPRING mentioned that:
“On days when Ethereum fees skyrocketed, XRP cross-exchange transactions also increased significantly. Overall, higher Ethereum fees correlate with higher volumes in XRP (Pearson’s R = 0.7, statistically this is a meaningfully strong positive correlation).”
“On May 12, 2020, Ethereum transaction fees rose over 400%. That same day, XRP cross-exchange transactions rose 226%.”
As Bitcoin attempts to stabilize after its 3rd halving, it will be interesting to see if the utility behind XRP can build momentum. With Bitcoin mempools continuing to experience congestion, it creates the perfect environment for XRP to capitalize. The ultimate driver behind XRP is the low volatility rates. When you have a digital asset that can provide low fees, fast transactions, and low volatility, then you have an industry differentiator. Ripple has pitched the low volatility characteristics as well. According to a blog post by Ripple :
“If you multiply 270,000 seconds [just over 3 days] in a low-volatility asset and you compare that to 3 or 4 seconds in a highly volatile asset like XRP, it turns out you are taking less volatility risk with an XRP transaction than you are with fiat.”
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