How Does a High Volume of Network Activity Affect the Average Transaction Fee?
A high volume of network activity (many transactions) leads to congestion, where the number of pending transactions exceeds the capacity of the next block. Since miners prioritize transactions with higher fees, users are forced to bid up the average transaction fee to ensure their transaction is included in a timely manner.
This dynamic creates a fee market.
Glossar
Network Activity
Metric ⎊ Network activity encompasses the quantifiable on-chain operations occurring within a blockchain ecosystem, measured by metrics such as daily transaction count, active addresses, and total transaction value.
Average Transaction Fee
Calculation ⎊ The average transaction fee represents the mean cost paid by users to process transactions on a specific blockchain network over a defined period.
Effective Transaction Cost
Cost ⎊ The effective transaction cost (ETC) represents the total expense incurred when executing a trade, encompassing not only explicit fees like brokerage commissions but also implicit costs arising from market impact and slippage.
High Volume
Velocity ⎊ High volume, within cryptocurrency and derivatives markets, signifies a period of intensified transactional activity, often exceeding historical norms and indicating substantial participation.