Ethereum transaction fees drop to lowest level in six months: report

In short

  • Ethereum fees are close to their August 2021 rates, measured in both dollars and ETH.
  • The NFT craze contributed to an increase in transaction costs at the end of 2021.

It seems forever that the adjectives “high” and “expensive” have been affixed to the phrase “Ethereum transaction costs”. But according to a new report from blockchain analytics firm Arcane Research, “decline” might be a better word right now.

In its most recent report, Arcane pulls CoinMetrics data to show that the seven-day average for Ethereum transaction fees are at their lowest rate since August last year. They have been falling precipitously since the second week of January.

“If you were waiting for lower fees before trading tokens or creating NFTs,” he writes, “this might be the right time.”

That’s not to say things are cheap for average consumers. Arcane pegs the cost of a token swap at around $15, but that’s still well below the ~$200 they might be running through much of fall 2021. (Wallet-to-Wallet Transactions, which, according to Arcane, are simpler, ran around $50 during this time.)

Unsurprisingly, the drop in fees coincides with a decline in crypto asset prices; Ethereum’s exchange value has declined by nearly 12% in the past week and nearly 15% in the past month. As ETH loses value, transaction fees become cheaper in dollars.

But on closer inspection CoinMetrics Data reveals that ETH-denominated transaction fees are also at a six-month low. This indicates reduced demands on the network through a combination of lower interest or increased reliability of scalability solutions such as rollups and sidechains. Certainly, rival networks such as Solana and Avalanche have eaten away at Ethereum’s market share by offering similar services – decentralized finance, games and NFT – with much lower fees and faster speeds.

Yet neither are likely answers. As Decrypt overcast in mid-February usage of scaling solutions has remained fairly stable while there is no clear evidence that other layer 1s are responsible for lower transaction prices.

Instead, the continued decline could be further evidence of a lull in interest in NFT, blockchain-backed contracts tied to digital or real assets. These non-fungible tokens, which often come in the form of digital art or collectibles, originated on the Ethereum network and caught fire last year. Their popularity has resulted in increased traffic on the network, which manages supply and demand by calculating computational costs for each transaction, token exchange, auction offer or the like and passing them on to the user. in the form of fees (denominated in ETH).

Ethereum is working on a long-term fix that would make the network more scalable; the main developers plan to completely switch to a proof-of-stake network between April and June this year. Once done, it will move forward with create “chains of fragments”, which will allow many more transactions to occur at once and reduce congestion.

The adjective for this, however, is “coming soon”.

https://decrypt.co/94648/ethereum-transaction-fees-drop-six-month-low-report

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