Abstract
We study the determinants of transaction fees in the Bitcoin and Ethereum blockchains, particularly focusing on the recent Merge – Ethereum's transition from a Proof-of-Work to a Proof-of-Stake consensus mechanism. Using multivariate regression analysis, we find that blockchain fees in USD increase with network congestion, measured by the mempool count, in a non-linear manner as hypothesized by Huberman et al. (2021). Additionally, the fees are positively influenced by the respective native currency's returns over the past six months. The Merge resulted in a fee reduction for both Bitcoin and Ethereum blockchains.
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