diff --git a/integration_tests/configs/ibc.jsonnet b/integration_tests/configs/ibc.jsonnet
index a10cf0de73..05e72760b3 100644
--- a/integration_tests/configs/ibc.jsonnet
+++ b/integration_tests/configs/ibc.jsonnet
@@ -5,6 +5,9 @@ config {
     'account-prefix': 'crc',
     'coin-type': 60,
     key_name: 'signer1',
+    'app-config'+: {
+      'index-events': super['index-events'] + ['message.action'],
+    },
     genesis+: {
       app_state+: {
         feemarket+: {
@@ -128,9 +131,13 @@ config {
           },
         },
         gas_price: {
-          price: 10000000000000,
+          price: 10000000000000000,
           denom: 'basetcro',
         },
+        extension_options: [{
+          type: 'ethermint_dynamic_fee',
+          value: '1000000',
+        }],
       },
       {
         id: 'chainmain-1',
diff --git a/integration_tests/cosmoscli.py b/integration_tests/cosmoscli.py
index 0024021380..14c2fa2d7f 100644
--- a/integration_tests/cosmoscli.py
+++ b/integration_tests/cosmoscli.py
@@ -189,6 +189,12 @@ def query_all_txs(self, addr):
         )
         return json.loads(txs)
 
+    def tx_search(self, events: str):
+        "/tx_search"
+        return json.loads(
+            self.raw("query", "txs", events=events, output="json", node=self.node_rpc)
+        )
+
     def distribution_commission(self, addr):
         coin = json.loads(
             self.raw(
diff --git a/integration_tests/shell.nix b/integration_tests/shell.nix
index f686410965..27a510bc59 100644
--- a/integration_tests/shell.nix
+++ b/integration_tests/shell.nix
@@ -19,6 +19,6 @@ pkgs.mkShell {
     pkgs.rocksdb
     (import ../nix/testenv.nix { inherit pkgs; })
     (import ../nix/chainmain.nix { inherit pkgs; })
-    (import ../nix/hermes.nix { inherit pkgs; })
+    pkgs.hermes
   ];
 }
diff --git a/integration_tests/test_ibc.py b/integration_tests/test_ibc.py
index 2d16f00292..73a078c9c9 100644
--- a/integration_tests/test_ibc.py
+++ b/integration_tests/test_ibc.py
@@ -9,6 +9,7 @@
     CONTRACTS,
     deploy_contract,
     eth_to_bech32,
+    parse_events_rpc,
     send_transaction,
     wait_for_fn,
     wait_for_new_blocks,
@@ -45,6 +46,17 @@ def check_balance_change():
     wait_for_fn("balance change", check_balance_change)
     assert old_dst_balance + dst_amount == new_dst_balance
 
+    # assert that the relayer transactions do enables the dynamic fee extension option.
+    cli = ibc.cronos.cosmos_cli()
+    criteria = "message.action=/ibc.core.channel.v1.MsgChannelOpenInit"
+    tx = cli.tx_search(criteria)["txs"][0]
+    events = parse_events_rpc(tx["events"])
+    fee = int(events["tx"]["fee"].removesuffix("basetcro"))
+    gas = int(tx["gas_wanted"])
+    # the effective fee is decided by the max_priority_fee (base fee is zero)
+    # rather than the normal gas price
+    assert fee == gas * 1000000
+
 
 def test_cronos_transfer_tokens(ibc):
     """
diff --git a/integration_tests/utils.py b/integration_tests/utils.py
index c46b7233dc..79b2bbbff5 100644
--- a/integration_tests/utils.py
+++ b/integration_tests/utils.py
@@ -1,3 +1,4 @@
+import base64
 import configparser
 import json
 import os
@@ -6,6 +7,7 @@
 import subprocess
 import sys
 import time
+from collections import defaultdict
 from concurrent.futures import ThreadPoolExecutor, as_completed
 from pathlib import Path
 
@@ -176,6 +178,21 @@ def parse_events(logs):
     }
 
 
+def parse_events_rpc(events):
+    result = defaultdict(dict)
+    for ev in events:
+        for attr in ev["attributes"]:
+            if attr["key"] is None:
+                continue
+            key = base64.b64decode(attr["key"].encode()).decode()
+            if attr["value"] is not None:
+                value = base64.b64decode(attr["value"].encode()).decode()
+            else:
+                value = None
+            result[ev["type"]][key] = value
+    return result
+
+
 _next_unique = 0
 
 
diff --git a/nix/default.nix b/nix/default.nix
index cd3a2c62fe..944a842cdd 100644
--- a/nix/default.nix
+++ b/nix/default.nix
@@ -47,6 +47,7 @@ import sources.nixpkgs {
           paths = with pkgs.openssl; [ out dev ];
         };
       };
+      hermes = pkgs.callPackage ./hermes.nix { src = sources.ibc-rs; };
     })
     (_: pkgs: { test-env = import ./testenv.nix { inherit pkgs; }; })
     (_: pkgs: {
diff --git a/nix/hermes.nix b/nix/hermes.nix
index f6f1053eb1..163171a831 100644
--- a/nix/hermes.nix
+++ b/nix/hermes.nix
@@ -1,31 +1,25 @@
-{ pkgs ? import ./default.nix { } }:
-let
-  version = "v1.0.0-rc.2";
-  srcUrl = {
-    x86_64-linux = {
-      url =
-        "https://github.com/informalsystems/ibc-rs/releases/download/${version}/hermes-${version}-x86_64-unknown-linux-gnu.tar.gz";
-      sha256 = "sha256-ms+3Ka8Ijbx63OXQzzNZ1kLrwVJDIVnvyc1TG69bun0=";
-    };
-    x86_64-darwin = {
-      url =
-        "https://github.com/informalsystems/ibc-rs/releases/download/${version}/hermes-${version}-x86_64-apple-darwin.tar.gz";
-      sha256 = "sha256-ygp49IPTXKqK12gE8OiyXjXhkJvfUZNuXVnS14SVScQ=";
-    };
-  }.${pkgs.stdenv.system} or (throw
-    "Unsupported system: ${pkgs.stdenv.system}");
-in
-pkgs.stdenv.mkDerivation {
+{ src
+, lib
+, stdenv
+, darwin
+, rustPlatform
+, symlinkJoin
+, openssl
+}:
+rustPlatform.buildRustPackage rec {
   name = "hermes";
-  inherit version;
-  src = pkgs.fetchurl srcUrl;
-  sourceRoot = ".";
-  installPhase = ''
-    echo "hermes"
-    echo $out
-    install -m755 -D hermes $out/bin/hermes
-  '';
-
-  meta = with pkgs.lib; { platforms = with platforms; linux ++ darwin; };
-
+  inherit src;
+  cargoSha256 = "sha256-42yTWf7fFEko0n/Y7AA2vA2s/gMypcZDvbbd9DAcuRw=";
+  cargoBuildFlags = "-p ibc-relayer-cli";
+  buildInputs = lib.optionals stdenv.isDarwin [
+    darwin.apple_sdk.frameworks.Security
+    darwin.libiconv
+  ];
+  doCheck = false;
+  RUSTFLAGS = "--cfg ossl111 --cfg ossl110 --cfg ossl101";
+  OPENSSL_NO_VENDOR = "1";
+  OPENSSL_DIR = symlinkJoin {
+    name = "openssl";
+    paths = with openssl; [ out dev ];
+  };
 }
diff --git a/nix/sources.json b/nix/sources.json
index df2c20ea03..763353aa29 100644
--- a/nix/sources.json
+++ b/nix/sources.json
@@ -72,6 +72,18 @@
         "url": "https://github.com/crypto-org-chain/gravity-bridge/archive/3d5bdc8af5227588d04064132335932ee88f57c3.tar.gz",
         "url_template": "https://github.com/<owner>/<repo>/archive/<rev>.tar.gz"
     },
+    "ibc-rs": {
+        "branch": "feemarket",
+        "description": "IBC Relayer (Hermes) and Modules in Rust",
+        "homepage": "",
+        "owner": "yihuang",
+        "repo": "ibc-rs",
+        "rev": "e33cceaa247d5eda7650c24bd3968dea6a05248a",
+        "sha256": "1kq73qvhdz35pxcx07rqqygvb3n8z8wsgw8knddj2b1x3yj66444",
+        "type": "tarball",
+        "url": "https://github.com/yihuang/ibc-rs/archive/e33cceaa247d5eda7650c24bd3968dea6a05248a.tar.gz",
+        "url_template": "https://github.com/<owner>/<repo>/archive/<rev>.tar.gz"
+    },
     "niv": {
         "branch": "master",
         "description": "Easy dependency management for Nix projects",