Ethereum transaction fees are always the hottest topic of discussion in the crypto community. Compared to the high in May 2021, the current ETH gas fee has fallen sharply. So what is causing this phenomenon? Let’s find out with CoinCu in this article!

Ethereum transaction fees have dropped gi m

The history of “expensive” Ethereum transaction fees is a problem that every user in the market has experienced at least once.

According to data from BitInfoCharts On February 16, 2021, the Ethereum network’s gas fee hit the average threshold 14 USD per transaction due to the explosion in decentralized financing (DeFi). DeFi projects built on top of Ethereum, such as lending and Income farming require continuous transactions, which in turn leads to network congestion and increases gas charges.

These high fees lasted until mid-May 2021, peaking at 70 USD/ transactions – an “unbelievable” number compared to competing blockchains like Binance Smart Chain (BSC), Solana, etc.

However, a miracle happened when until today, towards the end of June 2021, the ETH gas fees plummeted. At the moment, users only spend more on average 1 USD for a transaction on Ethereum. Swap or add liquidity on Uniswap – Ethereum’s leading hot and fee-intensive application – costs just over $ 3.

This is the simplest and most acceptable fee for the past year.

So the question is:

“Is it because the decrease in the number of transactions on Ethereum leads to a decrease in fees?”

or is

“Does the gloomy market make users stop trading?”

Let’s take a look at the Ethereum on-chain transaction counting data!

Will Ethereum’s number of transactions decrease?

In the Vietnam Cryptocurrency Market Review report in the first half of 2021 with Kyros Ventures, the number of Ethereum daily transactions did not increase, but it did not decrease too much. Compared to the explosive growth in transactions on BSC, trading at ETH seems to be “more stable” in the past year.

Comparing the decline from the top to the present, the decline in the number of transactions is there, but not as large as the decline in gas charges.

Thus, it can be confirmed that the number of transactions on Ethereum has not decreased too much and was not the main factor behind the reduction in gas fees.

So the reason for the sharp drop in Ethereum gas fees is:

The explosion of 2nd layer scaling solutions (Layer 2)

As explained in the article Kyros Kompass # 3: Overview of the Layer 2 Picture, the current Layer 2 scaling solutions on Ethereum are extremely diverse and explosive.

You can see that in order to support and expand Ethereum, Layer 2 solutions have been approached, built and gradually improved in their own way. If you look at what Polygon (MATIC) or Arbitrum did, we absolutely do not deny the effectiveness of Layer 2.

This helps reduce the pressure on the Ethereum network, which makes the blockchain easier to breathe. Since then, gas costs have fallen sharply.

end

From the above analysis, it is hoped that if the market rebounds, although the number of transactions will increase more rapidly thanks to Layer 2 solutions, Ethereum gas fees will remain low, which will help users experience DeFi transactions more easily.

One of the reasons for the birth of “Ethereum killers” such as BSC, Solana (SOL), Near Protocol (NEAR), Avalanche (AVAX), … is also that the ETH transaction fees are too expensive.

Hence, if ETH gas fees are easier to breathe, users / projects who left Ethereum for other blockchains will “rekindle the old love.” At this point, the race between the blockchain platforms is getting more and more exciting and intense.

Jane

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