Falling gas fees could be a danger signal for Ethereum
Over the past year, Ethereum’s rising gas fees have been one of the crypto industry’s biggest concerns. Especially since Ethereum plays a big role in the DeFi and NFT markets. The increase in gas fees has unintentionally led to grid bottlenecks. As a result, transaction time and costs are higher. The Ethereum development team has been trying to fix these issues and now gas fees appear to be falling.
Ethereum Average Transaction Fee | Source: BitInfocharts
In fact, Ethereum’s average transaction fees hit a six-month low this week, down almost 80% from their recent peak on Jan. 10.
Right now, Ethereum’s average transaction price is 0.0046 ETH, or $12.14, compared to around $52 in early January.
Ethereum Average Transaction Fee | Source: Glassnode
Ethereum’s average gas fee has also been down more than 84% since the beginning of January and currently stands at 0.002 ETH, or $5.3 per movement, compared to $29.92 on Jan. 10. it should be noted that they are still much higher than this time last year.
In addition, a sharp decline in gas charges consumed was last seen on February 15, and has since recovered. While the decrease in gas consumption could be due to lower transaction costs, it could also be due to a decrease in the number of transactions.
Total Gas Consumption | Source: Glassnode
The average number of transactions on Ethereum has been declining since the end of November, on February 27, the Ethereum network processed around 1.12 million transactions.
Average number of transactions on Ethereum | Source: Glassnode
Furthermore, the ongoing decline in DeFi usage could also be one of the reasons for this situation. The total value locked in DeFi smart contracts has dropped to $68.9 billion from $98.4 billion three months ago. Much of this is due to the impact of larger macro factors.
Total value locked in the DeFi market | Source: DeFi Pulse
Another factor that could cause Ethereum’s gas and fee consumption to drop is the proliferation of alternative blockchains. While token swaps on Ethereum cost $8.75, the zk-rollup L2 solution, zkSync, charged $0.22 for similar services.
Transaction Fees on Alternative Blockchains | Source: l2fees.info
In fact, zkSync 2.0 was recently launched on the Ethereum public testnet, touted as the first EVM-compatible zk-rollup and also interoperable with smart contracts.
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