Ethereum Fees at lowest in recent times; networks upgrade or decreasing activity?

There has been a significant drop experienced in Ethereum networks gas fees; however, it may not be there for long

Recently transaction fees on Ethereum network-based applications have dropped significantly. For the first time in many months, the costs have dipped to record lows. Experts and analysts think of it as network efforts towards bringing scalability improvements to stay relevant in the space full of competitors. 

As per the reports, the fees on Ethereum protocol are at their seven-month lows, and the same reduction is experienced across the entire network. Last weekend, the transaction fees were recorded to be around 19 gwei, costing 99 cents and one dollar. 

The last time the highest transaction fees of the Ethereum network was in August 2021; since then, the prices have been continuously decreasing steadily. However, experts say that the popularity of NFT and DeFi ecosystems resulted in high congestion on the network and, ultimately, high transaction costs. And as for now, both the sectors are not showing enough activities. It can be a potential reason for price dipping down. 

Currently, the fees are lower at 82.4% than its January high, continuously declining since then. It would be hasty to say the exact reason for all of this, but some sense could be out of limited possibilities that can be identified. 

One of the prominent and possible reasons, as mentioned earlier, is the decrease in network congestion because of no activity in two of the major parts with some highest congestion. As data shows, the dominance of Ethereum in DeFi space has dropped significantly from almost a year ago to 97%, currently holding only 58% of it. 

Look at the trading volume on OpenSea NFT marketplace based on Ethereum Network, which in the first week of February dropped down by almost 50%. Its trading value has fallen from $247 million to $124 million, eventually bringing the average gas price down from 134 gwei to 65 gwei. 

Another possible and robust reason could be application projects and protocol transferring or preferring networks other than Ethereum. Growing competition in the crypto space and blockchain networks brought down the popularity of Ethereum networks. 

However, even the developers behind the blockchain network are getting the signals and making efforts to keep away users’ woes of slow and expensive transactions. For instance, Co-founder Vitalik Buterin proposed EIP-4488 in November. 

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Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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