The crypto market has been on a downhill slope for a while now. Even Ethereum, the second-largest crypto, is 36% down its all-time high achieved back in November 2021. While the dip in value has hurt many traders, it has also come with certain benefits.
The decrease in fees has affected network activities, like DeFi (decentralized finance) trading volume, borrowing rates across lenders, transaction fees, etc. If you’d like to know if this development has affected traders’ sentiment as well as the price momentum of Ethereum, you will get more details here about the crypto’s predictions.
The reason behind the dip in Ethereum transaction fees is the network’s way of handling the blocks. Ethereum is now including ERC-20 and Ether wallet transfers in blocks for a fraction of the cost during December and January. Although it’s a computationally intensive form of transactions compared to wallet transfers, some users are paying as low as 0.0064 Ethereum for the transaction fees.
The Ether amounts to 20.04 dollars currently, while a similar transaction would have cost 0.04 Ether in March 2021. The fees amount to a whopping 125.18 dollars, which is as much as 6x the fees. Ever since Ethereum’s upgrade to EIP 1559, every block has had a fixed base fee. The fees must be paid in ETH to be added to the block.
The base fees can only be adjusted by 12.5% up or down after each block to limit volatility. It entirely depends on the previous block’s position in relation to the Ethereum developers’ set target gas fees. The network has protected itself from sky-rocketing transaction fees in a short period of time as a result of NFT mints or token launches by minimizing fee volatility.