Could Solana’s Surging Fees Create A Congestion Crisis?

Solana’s memecoin boom is driving up activity and transaction fees, in turn increasing network congestion.

Data from Dune Analytics shows average transaction fees at $0.156 on Nov. 21 after tagging a high of $0.164 one day prior. The milestone means Solana fees are up 2,838% since dipping to a local low of $0.00531 on Sept. 7, and up 21,270% over the past 12 months.

The spike in activity means sizable returns for validators, with annualized staking yields jumping to 11.2% following a 52% jump since early September, and daily staking revenue at $42.2 million after increasing 94% over the same period.

The milestones come as the price of Solana (SOL) posted new all-time highs of roughly $263 in recent hours as its market cap tagged a record high of 124.8 billion, according to The Defiant’s crypto price feeds.

Solana congestion

Wei Dai, a research partner at 1kx Network, an early-stage crypto investment firm, warned that Solana’s rising activity could drive congestion on the network, noting that Solana blocks have recently trended near 80% capacity.

“Increase in fees signals a start to global congestion,” Dai said. “Global congestion leads to rapid rise in min fees. Rise in min fees leads to exodus of apps and users.”

Dai compared the scenario to the fee crisis encountered on Ethereum's mainnet amid the rising popularity of DeFi four years ago.

However, Dai conceded that Solana congestion is currently subject to short-term bursts, meaning users willing to wait for delayed execution are still getting their transactions through with low fees. “This could change as demand increases, unless Solana tech stack improves to stay ahead of demand,” he added.

In June, Light Protocol and Helius Labs teamed up to launch a testnet for their ZK Compression scaling solution. Ethereum supporters described the solution as comprising a Layer 2.

Solana fees dwarf Ethereum L2 costs

The spike in transaction costs has resulted in average costs on Solana eclipsing those of Ethereum Layer 2s by orders of magnitude for most networks.

According to GrowThePie, average fees were just $0.002 on OP Mainnet, $0.08 on Base, $0.011 on Arbitrum One, $0.014 on Taiko, and $0.074 on Polygon zkEVM — the most expensive Layer 2 — on Nov.21. As such, the premium associated with transacting on Solana compared to top Ethereum L2s is currently between 111% and 7,700%.