Since the creation of EthereumThe network’s high transaction costs have been a major issue in the cryptocurrency market, pushing users to look for an alternative for their daily activities. However, with the recent development regarding the network’s gas fees, Ethereum could be poised for mass adoption as its transaction cost has dropped to a level never seen before.
Ethereum Gas Fees Drop Due to Network Upgrades
THE Ethereum NetworkOne of the most popular choices for cryptocurrency transactions within the industry, has seen its gas prices drop to record lows, providing a reprieve for users and developers who have long faced hurdles with high transaction fees.
EgyHash, a crypto trader and on-chain analyst cited the development in one of his recent research studies shared by CryptoQuant, a leading on-chain data provider. According to the expert, ETH’s daily average gas price has reached its lowest level to date, around 2.9 Gwei.
He also pointed out that the network’s average daily fee denominated in US dollars has reached a multi-year high of around $0.85. Due to this drop, its average daily burn rate has reached an all-time low of around 115 ETH burned daily.
While the drop in gas fees and burn rate may be significant, compared to the same period in the previous two years, EgyHash noted that Ethereum’s average daily transactions have remained stable or maintained good growth.
The on-chain analyst solely attributes this decline to the new Dencun upgrade, which was launched in March this year. Specifically, the Dencun Upgrade introduced a new transaction type known as Blobs, which allows data to be published on Ethereum with a significant reduction in fees, perhaps up to 100%, for Layer 2 Networks such as Arbitrum, Base, Optimism, among others.
Notably, this reduction in transaction fees could be positive for Ethereum as it makes the platform more usable and cost-effective for new applications, including non-fungible tokens (NFTs) and Decentralized Finance (DeFi).
As transaction prices reach new lows, optimism about ETH’s future and user experience is expected to increase within the community. Indeed, this development demonstrates the team’s efforts to deliver a more sustainable network, further cementing its position as a leader in the blockchain industry.
Impact of decline on investors
While a drop in gas prices could be beneficial for users and developers, EgyHash believes that it may not benefit investors. This is due to the large share of ETH usage shifted to its Layer 2 solutions and the possible issues this move could bring, such as user and liquidity fragmentation.
He also noted that since the launch of the Decun upgrade, the price of ETH has been volatile, experiencing a 35% drop even after the Ethereum Exchange Traded Funds (ETFs) have been approved. In the meantime, the overall supply of ETH has increased by around 197,000, valued at $500 million.
Featured image from Adobe Stock, chart from Tradingview.com
