Ethereum’s price is not the only thing that has dropped noticeably over the past few weeks. Commissions in the cryptocurrency network also showed a serious decline, so now it has become much cheaper to use Ethereum resources in the form of smart contracts and regular transfers.
By tradition, let’s start with the most relevant data. This morning, the average cost of gas for a quick transaction is 26 gvei.
This means that an almost instantaneous transfer of cryptocurrency will cost approximately the equivalent of $ 1.16, and exchanging cryptocurrency on the Uniswap decentralized exchange, with which we are already familiar, costs about $ 11.
Note that the real cost of the operation is likely to be slightly lower. The reason for this is that transactions usually use not all of the gas, but most of its volume.
This is the graph of the average commission on the Ethereum network since the beginning of 2017.
The peak of the indicator was recorded on May 15, 2021. Then for one transfer it was necessary to give the equivalent of $ 44.92 on average. Since then, the figures have dropped at least tenfold. And this also has an explanation.
How much does a transfer cost in Ethereum?
According to the analytical platform Coin Metrics, the price of gas on the Ether network fell to its lowest level since March 2020. Recall that gas is a unit of payment for transactions and interaction with smart contracts. The cost of gas is estimated in gwei (gwei), the smallest indivisible particle of one coin, equal to 0.000000001 ETH. You can read more about the mechanism for forming commissions in this article.
Recently, in order to quickly send a transaction on the Ethereum network, the user must set the cost of gas in the region of 29 gvei. The standard transaction speed costs about 18.5 gwei per gas. Back in mid-April, these numbers were at least ten times higher, Decrypt reports.
But if gas prices are so low, why was the average dollar equivalent of $ 4.39 yesterday and $ 2.30 on June 26 ? The fact is that the transaction fee is determined by multiplying the gas price by the amount of gas used.
Different types of transactions require different amounts of gas to be consumed. Thus, participating in trading unique NFT tokens at an auction, making a transaction on a decentralized exchange or sending ETH to someone requires different costs, because these transactions differ in the complexity of interacting with the cryptocurrency network. The situation can be roughly compared to the consumption of gasoline in a car. The cost of a trip by car will differ depending on the terrain, speed and other conditions, while the price per liter of fuel is the same for everyone.
Like real fuel, gas prices increase or decrease depending on demand. When a lot of people are using the network, prices go up. Gas prices began to decline at the end of April, even before the price of Ethereum collapsed from a record $ 4,372 to $ 1,888 in mid-May.
At the same time, the decrease in the gas price was due to an increase in the gas limit in equivalent from 12.5 million to 15 million gvei per block. The result of the change was that it became possible to place more transactions in each block, which both reduced competition in the network and lowered the price of gas.
Also, against the background of the collapse of the cryptocurrency market, a decrease in the activity of cryptocurrency owners has become noticeable, that is, they use the network for transfers, swaps and other operations not so actively. For clarity, we present a graph of the number of transactions in the Eth network during the day. The record for the indicator was recorded on May 15: then there were 1.66 million transfers. At the same time, 1.2 million transactions were carried out yesterday.
In addition, the so-called arbitrage bots, seeking to profit from the differences in the rates of various assets, traditionally raised the commission: they voluntarily paid higher gas prices in order to «push» such transfers into the block in the first place, because this was a financial benefit. However, now they are moving to other blockchains and using new, more affordable solutions, so the load on the Eth network has significantly decreased.
One way or another, Ethereum miners still receive income from commissions from transactions added to blocks, and they earn good money. We checked the actual data: yesterday the ETH miners earned the equivalent of $ 35.39 million.
You can also join this activity by visiting the 2Miners pool. Now a little less than 40 thousand people are mining it.
We believe that in 2021 we are still facing serious increases in fees on the Ethereum network. And although in early August the blockchain will survive the London update with the known EIP-1559, it will not affect the technical characteristics of the network in any way. This means that it will continue to cope with approximately 16 transactions per second, which creates the basis for congestion.
Finally, the problem of blockchain congestion will be solved with its transition to version 2.0. Then the network will be able to handle thousands of transactions per second – and this should be enough for everyone who wants to use the blockchain.