The average cost of processing Ethereum transactions has dropped to its lowest level in 49 days. This marks the end of the era of super-high gas costs that has made using the network too expensive.
Average cost of an ETH transaction at the lowest level in 49 days
Yesterday, according to data with BitInfoCharts, the average Ethereum transaction fee was $ 2,248. It hit $ 2.28, 4 cents more on August 23, but has not fallen below $ 2,248 since August 9, when the cost of an average Ethereum transaction was $ 1.94.
Just ten days ago, the average cost of a single Ethereum transaction was $ 11.6, up from $ 14.6 on September 2. These were the highest fees in the history of the entire network. The gas price was close to these levels in 2018 at the earliest, and was then $ 5.5.
What caused the high gas prices?
Fees increase when there are not enough miners to process transactions. If the charges are lower, it means less network activity.
One of the reasons for the high fees during these holidays was the rapid expansion of decentralized finance (DeFi). DeFi is a series of decentralized financial products such as loan protocols, decentralized stablecoins and synthetic assets.
A lot of money has been poured into these protocols over the past few months. According to DeFi PulseCurrently, around USD 11 billion is blocked in DeFi smart contracts. In June, it was only 1 billion, so the entire sector of decentralized finance grew by 1100%.
The largest DeFi smart contracts are placed in the Ethereum blockchain. However, the ETH network can only process 14 transactions per second, so it is unable to keep up with demand.
Declining fees may mean that activity in the DeFi sector is also declining. Perhaps people are starting to move to other blockchains. It could also mean that people rely on second tier solutions – software embedded in the Ethereum blockchain to make transactions cheaper or faster – or that DeFi smart contracts become more efficient or simply contain fewer transactions.
Whatever the reason, investors are sure to enjoy lower gas prices.