The cost of using Bitcoin and Ethereum blockchains is declining rapidly, as evidenced by the 93%-95% reduction in average transaction fees in the past few months.
Fees are paid to miners who process transactions on a typical proof-of-work blockchain. The size of the fee depends on the size of the transaction in bytes and how many transactions the coin has gone through in the past (because these need to be checked every time the coin is moved). Due to the limited capacity of the blockchain, the supply and demand of space also determines the size of transaction fees.
The transaction costs of Bitcoin and Ethereum surged to record highs in 2021 in April and May, respectively, which coincided with their rising coin valuations and price peaks.
Bitcoin’s average transaction fee reached $62.77 on April 24-this figure surpassed the all-time high of $55 since December 2017, which lasted for more than three years. By Sunday, the fee had dropped to $4.38. This marked a 93% reduction and brought the average cost of Bitcoin back to its lowest level since December 2020, before the market surge in 2021.
The same general pattern appeared in Ethereum, and the average transaction fee rose to US$69.92 on May 12.This is another historical high in the cost of using Ethereum, undoubtedly, partly because of the series of activities after the launch of the decentralized finance and Uniswap exchange, which has long been the largest consumer Resources on Ethereum.
On Sunday, the average cost of Ethereum was as low as $3.44—a number that has not been seen since the first day of January 2021—a reduction of 95%. Whenever coin prices suddenly increase or new applications increase network usage, the fees of both blockchains tend to increase.
As previously reported by Cointelegraph, the number of transactions in Bitcoin and Ethereum is also declining. From January to June, Number per day Of Bitcoin transactions dropped from approximately 400,000 to only 175,000. Similarly, between May and June alone, the daily transaction volume of Ethereum dropped from 1.6 million to 1 million, a decrease of 37.5%.