The Current State of Ethereum Transaction Fees
In recent times, the transaction fees on the Ethereum network have reached an all-time low. This situation is indicative of the overall state of the broader cryptocurrency market, where interest in digital assets is currently relatively low. Prices are much lower than they were in the past, and the volatility that the crypto market is known for is nowhere to be seen. However, there is another factor contributing to the low fees on the Ethereum network.
ETH Fees at Their Lowest Level in a Long Time
Let’s first take a look at the current situation. The paid transaction fees on Ethereum reached the lowest point in 8 months this past Sunday. In total, 1,719 ETH was paid for all transactions on that day. Since December 26, the total daily transaction fees have not been this low.
At the current ethereum exchange rate, the total stack of ether is worth slightly more than $2.8 million.
You may recall the situation earlier this year when gas fees on Ethereum skyrocketed once again. In May, there was a huge hype surrounding memecoins, which resulted in users having to pay significant amounts for transactions on the network. On May 5, a peak of 16,720 ETH in paid transaction fees was observed. The figure from Sunday is 89 percent lower.
Since the London hard fork in August 2021, Ethereum transaction fees consist of the base fee and the priority fee. The base fee is the minimum price required to register a transaction on the Ethereum blockchain. This ETH is also permanently burned. The priority fee allows users to give a tip to incentivize validators to include the transaction in the block.
The Popularity of Ethereum Scaling Solutions
A decrease in the total paid fees indicates low network usage, as the fees are determined by the level of activity in the network, primarily the number of ongoing transactions.
Furthermore, this decline is likely also due to the increasing popularity of Ethereum layer-2 scaling solutions. Popular networks such as Optimism (OP), Arbitrum (ARB), Polygon (MATIC), and the recently launched Base help scale Ethereum, reducing congestion and keeping transaction fees on Ethereum under control.
The launch of the decentralized social media application Friends.tech is a great example of the value of layer-2 networks. Friends.tech, launched on Base, gained over 100,000 users and generated over $25 million in revenue within 2 weeks. At the same time, the costs on the Ethereum network are currently at an all-time low.