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Binance Spikes Ethereum Fees: What has Caused the 30X Gas Prices?

Published September 22, 2023 4:00 PM
James Morales
Published September 22, 2023 4:00 PM
Key Takeaways
  • An influx of deposits to a Binance hot wallet caused a spike in Ethereum gas fees.
  • The exchange was apparently consolidating funds.
  • Critics have questioned why a major global technology firm can’t manage its asset flows in a less disruptive manner.

Binance’s Ethereum wallets are among the most well-funded in the world, collectively holding nearly $20M worth of ETH. But on Thursday, September 21, 2023, something seems to have gone wrong with the way Binance moves funds between its wallets.

On-chain data shows that transfers in and out of the “Binance 14” hot wallet surged to well above its normal daily volume, increasing gas fees in the process.

Binance Causes Major Spike in Gas Fees

Because of mechanisms intended to limit network congestion, when a single Ethereum address engages in a high volume of transactions, the fees it pays also increase.

This appears to be what happened on Thursday, September 21, 2023, when Binance 14  received 149,373 deposits from 148,317 separate addresses. In contrast, during the previous week, it never received more than 6,000 deposits in any one day.

Binance 14 gas fees
  Gas fees accrued by the Binance 14 hot wallet.

As a result of the sudden influx of deposits, Binance 14 racked up 530 ETH in gas fees in a single day.

The surge in activity caused by Binance 14 deposits was enough to spike fees across the Ethereum network. For a period on Thursday, average gas fees climbed to as high as 270 gwei .

Although the congestion soon eased up and gas fees decreased to a more normal level, the short-lived upsurge bumped the daily average to 38.88 gwei. For Binance 14, average fees incurred throughout the day stood at 531.1 gwei.

What Caused the High Transaction Volumes?

According to reporter Colin Wu, Binance attributed the increase in deposits to Binance 14 to its wallet aggregation process.  

However, in the past, Binance 14 successfully managed similar influxes without driving up gas fees to such an extent.

On September 13, for instance,  the same wallet received over 700,000 deposits, But while the previous transaction surge had a significant impact on the wallet’s gas fees, the knock-on effect was far less pronounced.

Accordingly, some analysts have questioned why the company can’t manage its asset flows in a more efficient manner. For example, Gnosis co-founder Martin Köppelmann speculated  that Binance “are using a really inefficient script to consolidate funds and are massively overpaying transaction costs.”

Others have been more blunt.

Commenting on  the incident, Crypto influenecer Adam Cochran said it “doesn’t bode well for a company.”

“It does however track with a company […] that hires the cheapest global talent they can find,” he added .

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