Despite heightened network activity, Bitcoin and Ethereum have seen their transaction fees drop to multi-month lows.
This trend emerged in a week marked by significant losses across the cryptocurrency market, with Bitcoin’s value dipping below the $63,000 threshold.
Ethereum’s low gas fees despite high usage
Ethereum’s transaction fees, or gas prices, have plummeted to figures not seen for several years. The average gas price recently dropped to just 7.3 Gwei, starkly contrasting the high of 98.68 Gwei recorded earlier in March. This reduction has made Ethereum far more accessible for developers and everyday users, particularly noteworthy given the current network usage levels.
The significant decrease in gas fees can largely be attributed to the broader adoption of Layer 2 (L2) solutions, designed to improve Ethereum’s scalability by processing transactions off the main chain. This helps alleviate network congestion and, consequently, lowers costs. Data from L2Beat indicates that on June 21, the combined transaction rate for Ethereum’s Layer 1 and Layer 2 protocols was about 299 transactions per second.
Brian Smocovich, founder of Pistachio Fi, explains the efficiency gains: “The L1 gas market is now more efficient because most volume is on L2s, L2 to L1 settlement is 100x cheaper than pre-4844, and we have the gas market efficiencies of EIP-1559.”
These efficiencies have significantly reduced the cost of transactions. For example, a swap on Uniswap now costs merely $1.06 and transferring ETH on-chain costs only $0.23. Advanced L2 networks like Base further reduce these costs, with certain transactions costing as little as $0.0016.
Ethereum’s burn rate and inflationary trend
The reduced gas fees have lowered the Ethereum burn rate to a 12-month low despite the benefits. This has resulted in a slight inflationary trend in Ethereum’s supply, growing at about 0.56% annually, according to figures from ultrasound. Money.
Similarly, Bitcoin has seen a reduction in transaction fees, with the average cost now at $1.94, the lowest since October of the previous year. This decrease is significant, considering that periods of high market activity and price surges typically lead to higher fees. Notably, during the 2021 bull run, when Bitcoin reached $69,000, transaction fees did not spike as expected.
Market impact and user benefits
The broader crypto market is experiencing severe fluctuations, with substantial losses among various cryptocurrencies. This market downturn has triggered extensive liquidations of leveraged positions, which have also had considerable financial impacts on spot holders.
Despite these market challenges, the lower transaction fees on both Bitcoin and Ethereum benefit users and developers. These reduced costs enhance the affordability and accessibility of blockchain networks, supporting various applications from decentralized finance (DeFi) to non-fungible tokens (NFTs), making this development a notable positive aspect in turbulent times.
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