Ethereum gas charges at 6-month low as congestion eases


Ethereum transaction fees fell to their lowest since December because blockchain activity cooled while use of Ethereum Layer 2 solution protocols such as Polygon (MATIC) increased, according to blockchain data and analysts.

As of June 27, the average transaction fee on the Ethereum blockchain was $ 4.42, according to data from Coin Metrics. That’s down from fee levels above $ 60 in mid-May.

Gas refers to the computational efforts required to perform specific operations on the Ethereum network. Fees, paid in ether, are required to complete a transaction on Ethereum. Ethereum is the second largest blockchain network after Bitcoin.

High gas charges have been one of the biggest challenges for Ethereum in an era of increasing grid usage. Interest in decentralized finance (DeFi) has increased with the price of ether.

Analysts told CoinDesk that lower gas prices are a natural response to the recent cooling in the crypto market.

At the time of going to press, Ether was trading around $ 2,103.77, less than half of the all-time high of $ 4,382.73 reached on May 11, according to data from CoinDesk 20.

Read more: Polygon price hits record high, benefiting from Ethereum congestion

Congestion on the Ethereum blockchain has decreased with the price of cryptocurrency. Transactions on the network fell to around 1.1 million on June 27, from a high of around 1.7 million in May, according to Coin Metrics. Data from CoinGecko shows that the volume of ether trading on the exchanges has also declined significantly.

The exchange data is in line with the activity on decentralized exchanges (DEX). Dune data shows DEX’s weekly volume fell to less than $ 20 billion for the week starting June 21, compared to more than $ 40 billion for the week starting May 17.

Weekly volume of DEX transactions.
Source: Dune analysis

The drop in gas charges “means the level of network activity is not as high,” said Vishal Shah, founder of the Alpha5 exchange. And because Ethereum is a base layer for many DEXs, “it also implies that there is less speculative volume spinning.”

At the same time, the growing adoption of Layer 2 Ethereum solutions such as Polygon has also helped lower Ethereum gas costs, as CoinDesk reported recently. Analysts have seen a “significant number” of users switch from Ethereum to Polygon; many native Ethereum DeFi protocols such as Aave, Kyber Network and SushiSwap have recently switched to the protocol.

Another factor behind the reduction in gasoline costs is the change in the types of robots used by Ether and DeFi traders, according to Ryan Watkins, research analyst at Messari.

Traders previously used an auction called “Priority gas auction”(PGA) to increase gasoline costs in order to be the first in line for transactions. They recently moved to Flashbots, where miners and traders transfer their communication from the blockchain to private channels.

The order of transactions on Ethereum matters, as CoinDesk research associate Christine Kim wrote in her valid points. May 12 newsletter. Especially for DEX traders, being a few milliseconds ahead of another trader can mean an opportunity to earn thousands of dollars.

Read more: Valid points: MEV on Eth 2.0: the good, the bad and the ugly

The Maximum Cumulative Extractable Value (MEV), or the amount of money an Ethereum miner is likely to earn as a direct result of their ability to insert, exclude, and rearrange transactions within a block, has been declining since beginning. June, remaining at just over $ 700 million, according to Flashbots MEV dashboard.

Flashbots, in short, “have helped alleviate the unnecessary gas wars that arbitrage bots waged against each other,” Watkins said.

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