Ethereum miners, now referred to as validators after the Ethereum blockchain “Merge” in September, are benefiting from the intense competition between non-fungible token (NFT) marketplaces Blur and OpenSea that has driven up transaction, or gas, fees on the network.
Ethereum gas fees, which typically rise when there is greater demand for network blockspace, have been climbing from the beginning of the year, with recent spikes mainly driven by the NFT market, according to data from on-chain data firm Glassnode.
Ethereum validators earn rewards via gas fees by staking their own Ether to help secure the network. Median transaction gas prices came in at 35 Gwei (a denomination of ETH) on Monday, and exceeded 38 Gwei on Feb. 16, the highest since June 2022, Glassnode data showed.
“Miners are the clear winners right now, as they’re processing this massive increase in transactions on Ethereum,” said Yehudah Petscher, NFT relations strategist of Forkast Labs’ Cryptoslam.
“You’re reminded of that each time you go to transact, whether sending some ETH between wallets or buying an NFT. That little warning pops up in MetaMask telling you that the network is busy, and you can’t help but think of how well the miners are doing,” Petscher added.
The Blur NFT marketplace, which launched in October, has gained traction as it doesn’t charge transaction fees for users and recommends a low royalty rate payment for NFT creators. The moves were seen as a clear challenge to NFT market leader OpenSea, which responded by slashing its fees to zero for popular NFT collections as it lost ground to Blur.
Short-term win?
Alice Kohn, an analyst at Glassnode, wrote in a report last week that the recent market focus on Blur has “led to a surge in demand for blockspace, resulting in increased fees for validators.”
Over the past seven days, the Blur NFT marketplace recorded US$410.93 million in trading volume, more than seven times higher than OpenSea’s US$52.4 million, DappRadar data showed.
Elsa Kong, head of research of Singapore-based NFT data firm NFTGo, told Forkast that the high gas fees caused by the Blur token airdrop may be seen as beneficial for Ethereum validators in the short term, but “probably it wouldn’t bring any big changes in the long run.”
Kong said that it was not entirely accurate to call Ethereum miners the “winners” in this situation, as the success of the Ethereum network depends on a variety of factors, including user adoption, network security and developer activity.
“It’s important to note that the Blur token airdrop is not directly related to Ethereum miners, as the miners care more about the Ethereum upgrade such as (the switch from) proof-of-work to proof-of-stake,” Kong said.
Bigger stakes
Nick Ruck, head of strategy of NFT intellectual property licensing firm ContentFi, said smaller stakers may not see a big difference in their earnings, adding he has been an active Ether staker since November.
“Obviously, higher gas fees aren’t great for everyday users, but you get more fees for stakers anyway,” he said.
“Personally, the higher gas fees from my own day trading aren’t offset by the increase in earned fees, but I’m also not staking a whole lot compared to a larger staking-as-a-service firm,” Ruck added. “For most people staking in pools, they might not see a big difference since they’re sharing in portions.”
Ruck said that there’s “a lot of maintenance” that goes into validating. “The more industrialized your setup is, the more you’ll earn simply due to being more efficient. If you do this at home, you’ll get penalized for going offline, for example.”
Ruck agreed that validators will not be long-term beneficiaries from the Blur and OpenSea fight for dominance “simply because I think it’ll be short-lived.”
“For now, they may earn more, but I think it’s too temporary,” Ruck said. “How long can Blur and OpenSea go without earning those fees, or just earn minimally compared to previously?”
Kohn of Glassnode wrote that the recent attention surrounding Blur has “yet to have an appreciable impact on network adoption.”
Kohn said Blur and OpenSea may be fighting over the same pre-existing user base, as the latest interest in NFTs “appear to primarily appeal to existing users, and are as yet, unable to attract new users to the Ethereum network.”
Valida Pau contributed to this report.
