Ethereum Miners Bank Record $166 Million in September Fees

Miners on the Ethereum network recorded their highest-ever earnings in September 2020, according to data from on-chain analytics service Glassnode. The growth of the decentralized finance (DeFi) market in the crypto space was a major factor behind this rise.

Miners are entities or individuals who utilize computing rigs to maintain and mine blocks on proof-of-work cryptocurrencies like Bitcoin and Ethereum for “rewards” in the form of the tokens they are mining.

Increased network and individual smart contract activity lead to higher rewards for miners, as participants bid higher to get their transactions executed sooner.

“Ethereum miners made a total of $166 million from transaction fees in September – a new [all-time high]," said Glassnode in a tweet. The metric represented an increase of 47% compared to the previous high set in August.

In contrast, Bitcoin miners made only $26 million from fees during the last month.

Some miners said much of the growth came as increased trading activity in low-cap DeFi projects and non-fungible tokens—often having funny-sounding names like "Meme" and "Shroom"—ended up attracting huge retail capital.

“Because of the DeFi boom, transaction fees and miner earnings were really high,” Thomas Heller, chief operating officer of mining firm Hashr8, told Decrypt.

Why the big earnings?

DeFi tokens are usually traded on decentralized exchanges (DEXs), such as Uniswap, which currently boasts over $2 billion in liquidity, according to tracking site DeFi Pulse.

Compared to centralized exchanges (CEXs) like Binance, all DEX transactions are carried out on-chain on the Ethereum blockchain, as opposed to the in-house trade matching engines of CEXs. This means miners approve and conduct each DEX trade, and hence, gain money on each trade.

In March and April this year, Glassnode data shows Ethereum miners made an average of $4 million in fees. However, the earnings started picking up in June and July when the DeFi industry started to gain steam due to the launch of lending protocol Compound. Miners pocketed $22 million and $32 million in June and July respectively, data shows.

The earnings are likely to go up as more trading, transactions, and smart contract interactions are made on the Ethereum network. And while some industry observers say DeFi could be a bubble, miners are likely hoping it doesn’t burst anytime soon.