The cost of using the Bitcoin and Ethereum blockchains is declining rapidly, as evidenced by the 93-95% reduction in average transaction fees over the past few months.
Fees are paid to miners who process transactions on a specific proof-of-work blockchain. The size of the fee depends on the size of the transaction in bytes and how many transactions a coin has gone through in the past (as these must be checked every time the coin is moved). Since the blockchain has a limited capacity, the supply and demand of space also determine the size of the transaction fee.
Bitcoin and Ethereum both saw their transaction costs hit all-time highs in 2021 in April and May respectively, coinciding with their soaring coin valuations and price peaks.
Bitcoin’s average transaction fee peaked at $62.77 on April 24 – a figure that surpassed an all-time high of $55 since December 2017 that lasted more than three years. By June 6, fees had dropped to as low as $4.38. This marked a 93% drop and sent BTC average fees back to levels not seen since December 2020 prior to the 2021 market pump.
The same general pattern was observed on Ethereum, where the average transaction fee rose to $69.92 on May 12. This was another all-time high for the cost of using Ethereum and was undoubtedly driven by the flurry of activity that accompanied the launch. Decentralized finance and the UniSwap exchange, which has been around for a long time largest consumer of resources on Ethereum.
As of June 6, Ethereum’s average fees were as low as $3.44 – a figure not seen since the first day of January 2021, a 95% decrease. Whenever there is a sudden increase in the price of the coin, or a new application that increases network usage, fees on both blockchains increase.
As previously reported by Cointelegraph, the number of transactions on both Bitcoin and Ethereum is also declining. between January and June, daily number Bitcoin transactions fell from around 400,000 to just 175,000. Similarly, the daily transaction count for Ethereum fell from 1.6 million to 1 million between May and June alone, a drop of 37.5%.