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- 1 Ethereum touched its lowest in daily transaction fees on 27th August.
- 2 Ethereum’s transaction fees decreased by almost 83%.
Ethereum’s daily transaction fees reached their lowest point in eight months, dropping to about 1,719 ETH, equivalent to approximately $2.1 Million, on August 27th. This decrease in gas fees is primarily due to reduced network usage and the increasing adoption of Layer 2 scaling solutions.
Based on information provided by on-chain analytics companies, CryptoQuant and IntoTheBlock, the second-largest cryptocurrency has become the most affordable it’s been since December 26th, 2022.
The pessimistic market outlook is a key factor in the notable drop in gas fees. When decentralized finance activity slows down, it results in lower gas fees, whereas increased activity often causes network congestion and a surge in fees.
Friend.tech-like Products are Also Not Helping
Ethereum’s daily transaction fees have decreased by 83% from 16,720 to 1,719 ETH, based on year-to-date data since May 5th. Even with the launch of Friend.tech on August 10, fees have stayed low, underscoring the significance of scaling solutions.
Friend.tech has experienced substantial traction, attracting more than 100,000 users and generating $2 Million in revenue during its initial month of operation. This success indicates that the era of network congestion may be behind.
The platform successfully launched on Coinbase’s Layer 2 chain, Base, ensuring seamless network operation despite its remarkable popularity. According to on-chain data from IntoTheBlock, the mainnet of the Layer 2 scaling solution Optimism achieved a new all-time high of 900,000 transactions.
David Lawant, head of research at Falcon X, pointed out that the current decrease in fees observed throughout the network is a departure from the past when new projects like CryptoKitties often caused prolonged network congestion.
Since the launch of Friend.tech, a decentralized social media platform, on August 10th, Ethereum L1 fees have decreased by 25% compared to the average fees up until that point in the year. This stands in stark contrast to previous occasions when the popularity of early NFT application CryptoKitties or the recent NFT drop from Yuga Labs would often cause temporary congestion on the Ethereum network.
Layer 2 Solutions Taking Over
Ethereum’s development journey has been significant. Positioned as a leader in smart contract innovation, the blockchain is home to a majority of decentralized applications (DApps) and a wide array of decentralized finance (DeFi) protocols.
Although this drive resulted in widespread adoption and a substantial rise in the asset’s value, a major drawback was the high gas fees and sluggish transaction speeds during periods of congestion.
Over the years, Ethereum co-founder Vitalik Buterin and other developers have consistently emphasized the importance of upgrading to Ethereum 2.0. This upgrade will shift the network to a Proof-of-Stake (PoS) consensus mechanism, eliminating the need for miners.
The upgrades also encompassed Layer 2 solutions, alleviating network pressure and decreasing transaction speeds and fees while maintaining security.
In recent years, there has been widespread adoption of Layer 2 networks, with numerous developers launching projects on these solutions.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
