The Doge effect is sending Ethereum transactions fees up the proverbial tree.
Per data from BitInfoCharts and Blockchair, the average cost of an Ethereum transaction is currently $64, partly driven by demand for the Ethereum token (and Dogecoin doppelganger) Shiba Inu (SHIB) – and its own copycats. Binance exchange CEO Changpeng Zhao tweeted that the platform “ran out of ETH deposit addresses due to SHIB,” which “has never happened before for any ERC20 token.”
Ethereum’s fees, called gas, are priced in ETH and vary depending on the type of transactions; for example, a simple transfer costs less gas because it is less computationally intensive, while a transaction to swap, say, ETH for WBTC would cost more.
SHIB was created last year, but the renewed trading interest appears to only be driven by speculation that the coin will mimic Dogecoin’s stupendous success (this success has come to pass, as SHIB is up 36,750% in 30 days, fueled by exchange listings at Binance, OKEx and Huobi). Dogecoin has become a favorite of TikTok influencers and the world’s second richest man, Elon Musk.
Nipping at the heels of both DOGE and SHIB’s success, other imitators have cropped up recently.
Most of these would-be doge-eat-doge projects are spun up on Ethereum as ERC20 tokens, the most popular token design for Ethereum which led to the mushrooming of ICOs in 2017.
In 2020 and earlier this year, it was not uncommon for Ethereum fees to go vertical as use of DeFi platforms grew. But this new fee pressure, rather than resulting from use of actual smart contract platforms, seems to come largely from traders speculating on a litter of dog coins.