- Ethereum’s transaction fees have recently dropped to a yearly low, with an average cost of $1.13 per transaction.
- The decline in fees is attributed to the growing adoption of layer-2 scaling solutions, offering cost-effectiveness and efficiency.
- Lower gas fees could attract more decentralized applications and smart contracts, potentially influencing ETH’s value.
Ethereum’s transaction fees have experienced a significant drop, reaching levels not seen in nearly a year, thanks to the effective implementation of scaling solutions.
Ethereum, once notorious for its high transaction fees, has become unexpectedly cost-effective in recent days.
Affordability Surges on Ethereum
According to the on-chain analytics firm Santiment, gas fees on Ethereum have dropped to levels last witnessed almost a year ago. The average cost for processing transactions over the past week was a mere $1.13, marking a substantial reduction from the peak fees seen in May.
L2 Networks Make a Significant Impact
The notable decline in transaction fees can be attributed to the growing adoption of layer-2 scaling solutions. In 2023, demand for block space on layer-2 solutions skyrocketed as users flocked to take advantage of their cost-effectiveness and efficiency benefits.
According to L2Beat, transaction activity on scaling solutions experienced a remarkable surge in 2023. In fact, the average transactions per second (TPS) on layer-2 networks were 5.78 times higher than on Ethereum over the past week.
In essence, layer-2 solutions fulfilled their original purpose by relieving Ethereum of the on-chain transaction burden and aiding in its scalability.
Santiment observed that lower gas fees could enhance the Ethereum network’s utility, potentially attracting more decentralized applications and smart contracts. This, in turn, might exert upward pressure on the value of ETH in the near future.
However, there hasn’t been a significant change in the value of ETH recently. According to CoinMarketCap, the coin remained within a range over the past week, trading at $1,635 at the time of writing.
Further Decrease in ETH Liquid Supply
The lack of significant price movement could be attributed to the continued withdrawal of ETH from centralized cryptocurrency exchanges. Santiment reported that October 4th saw the largest outflows in over six weeks, with over 110,000 ETH tokens leaving the liquid supply.
With this recent exodus, the liquid supply of ETH dropped to 10.6 million, its lowest point in five and a half years. In contrast, the self-custody ETH supply reached an all-time high of 115.8 million, accounting for 96% of all ETH coins in circulation at the time of this report.
Meanwhile, investor sentiment remained bullish regarding ETH’s long-term prospects, as indicated by the positive weighted sentiment for the asset.
Disclaimer: Please note that the viewpoints and perspectives expressed by the author, as well as any individuals referenced in this article, are intended solely for informational purposes. They should not be construed as financial or investment advice. It’s important to acknowledge that investing in or trading cryptoassets carries inherent financial risks.