The cost of transferring Ether or a non-fungible token hasn’t been this cheap in months.
- Arcane Research reports that Ethereum transaction fees are at a six-month low.
- Research shows that the average price per transaction on the Ethereum blockchain was $15, compared to fees during last fall’s peak traffic of up to a few hundred dollars.
- Real-time blockchain monitoring site Etherscan.io shows that the cheapest transaction fee on the Ethereum network is $2.51 at the time of writing.
- Fees on “layer 2” platforms built on Ethereum, as cheaper and faster options are also falling, costing pennies in some cases.
As U.S. consumers feel pain at the pump to fuel their cars, cryptocurrency traders feel relief as Ethereum (ETH) “gas” fees per transaction are at an all-time low for months.
Explain Ethereum Gas Fees
Each time a transaction occurs on the Ethereum network, transaction fees – also known as gas fees to speed up the transaction – are incurred. Indeed, each interaction on the Ethereum blockchain requires a certain amount of computational resources from the network.
Depending on the complexity of the transaction and how quickly the user wants the transaction to settle, gas fees change. The more complex and rapid the transaction, the more expensive it will be. For example, a basic wallet-to-wallet transfer is a simple and inexpensive operation, while more computationally heavy tasks such as token swaps or non-fungible token (NFT) minting require more resources and bandwidth. , resulting in higher fees.
Ethereum has had historically high gas fees since last summer
By mid-2021, transaction fees on the ETH network had soared by as much as 470% compared to the start of the year due to congestion on the network due to the Dogecoin craze and NFT mania at the time. ‘era.
According to a report from Arcane Research published this week, average transaction fees were above $50 on several days last year, while the cost of more complicated token exchanges was well over $200. Arcane now estimates the price of a token swap on Ethereum to be around $15. It hasn’t been this low since August 2021.
This drop in gas fees is even lower according to Etherscan.io, which tracks real activity on the ETH network. At the time of writing, this tracking website states that the ETH transaction fee for a basic transaction is only $2.51.
Reasons to Lower Ethereum Gas Fees
Several factors are likely contributing to the decline in Ethereum network usage and the corresponding drop in fees. One of the most popular drivers of volume on this network for over a year has been decentralized finance (DeFi) activity. When DeFi was first launched, Ethereum held over 90% of the traffic. According to DeFi Llama, the DeFi dominance of the ETH blockchain is decreasing. Users have moved transactions to other blockchains with cheaper fees, as seen from their share of the current DeFi market below:
- Ether: 54%
- Earth: 13%
- Binance Smart Chain: 6.0%
- Avalanche: 5.5%
- All others: 22%
Additionally, there are other networks – called “Layer 2” (L2) solutions – that actually run on Ethereum’s “Layer 1” blockchain. Since L2 networks do not have the same maintenance costs as basic blockchain, these L2 platforms charge significantly less. As of this writing, here are the current transaction fees for some of the cheapest L2 processing fees according to the L2fees.info website:
- Buckle: $0.05
- ZKSync: $0.07
- Polygon Hermez: $0.25
- Optimism: $0.25
Finally, as Ethereum developers continue to upgrade the network as part of its ETH2.0 development plan, the ETH blockchain will soon be able to handle over 100,000 transactions per second, which will reduce network backups, transaction costs and settlement delays.
NFT sales remain strong
Some media are reporting that a drop in NFT transactions is a reason for lower ETH gas fees, but that doesn’t seem to be the case. If you look at the last 30 days of activity on the final site for NFT metrics — NonFungible.com — the number of NFT sales increased by more than 565%, revenue increased by 231%, and active wallets increased by 280%.
Although this is not financial advice, and bearing in mind that you should always do your own research and only invest what you can comfortably afford to lose, if you are looking to buy your first NFT, you can save a lot on transaction fees right now.
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