A cryptocurrency wallet associated with the prominent trading platform, Binance, has seen massive activity in the last 24 hours, leading to abnormally high transaction fees on the Ethereum network.
Binance Wallet Incurs Nearly $850,000 Gas Fees In One Day
A crypto wallet labeled “Binance 14” witnessed a significant transaction surge on September 21, rising above 140,000. As a result of this activity surge, transactions of the Binance-owned wallet consistently incurred gas fees of over 300 gwei, even though the network’s average fee was around 10 gwei.
This gas fee jump and significant wallet activity have resulted in around 530 ETH (equivalent to nearly $850,000) in gas used on the Binance 14 address today.
The increase in transactions on the Binance wallet had a broader, albeit temporary, impact on the Ethereum network. Gas fees on the blockchain momentarily jumped from less than 10 gwei to above 330 gwei per transaction, according to blockchain data tracker Etherscan.
Gas fees refer to the cost blockchain users incur or pay validators to conduct transactions or execute contracts on the Ethereum network. Fees depend on the blockchain’s demand and supply of processing power. This means when a network has many transactions, there is often a high demand for processing power, which increases gas fees.
Possible Reasons For The Gas Fee Spike
In the wake of this incident, Wu Blockchain reported that Binance said it was carrying out its wallet aggregation process when the gas fees were low to facilitate withdrawals and ensure the safety of user funds. Nonetheless, some prominent crypto community members have weighed in on the situation, offering possible explanations for the gas fee spike.
Martin Koppelmann, cofounder of the Gnosis chain, said on the X (formerly Twitter) platform that Binance might be using a “really inefficient script” to consolidate, leading to high transaction costs.
Gas prizes spiking because of a ton of regular ETH transfers related to Binance.
a) they are using a really inefficient script to consolidate funds and are massively overpaying transaction costs
b) something fishy is going on— Martin Köppelmann 🦉💳 (@koeppelmann) September 21, 2023
Blockchain analysts at Scopescan gave a similar prognosis on the gas incident. The on-chain analytics platform said:
Due to Binance consolidating funds from long-inactive deposit addresses, the Ethereum network is experiencing congestion, causing Gas fees to surge to 300 gwei.
Adam Cochran, a popular crypto investor, suggested that the abnormally high transaction fees might have been due to Binance’s subpar APIs. In his X post, Cochran criticized the exchange’s technological infrastructure while casting doubts on its capacity to safe-keep “hundreds of billions in coins across multiple protocols.”
According to CoinGecko data, the price of Ethereum currently sits below $1,600, reflecting a 2.8% decline in the past 24 hours. Nevertheless, Ether maintains its position as the second-largest cryptocurrency, with a market capitalization of over $190 billion.
Ethereum price trading beneath $1,600 on the daily timeframe | Source: TOTAL chart on TradingView