Victor Ugochukwu · Dec 14, 2020 . 5min read
Ethereum Network average fees drop to lowest in 36 days as DeFi craze slows down
Average network fees on Ethereum as at press time is $2.342 which represents lowest transaction fees in last 36 days.
By Victor Ugochukwu · Sep 28, 2020 . 6min read
Ethereum network‘s average transaction fees have dropped to its lowest in 36 days signalling network users could be experiencing normalcy as reversal situation points to the slowness in the DeFi craze that has persisted since after the coronavirus global market crash.
Average network fees on Ethereum as at press time is $2.342 according to data from BitInfo Charts. This is much lower when compared to $13.233, which was average transactions fees as of September 1st. The fees would then climb higher to $14.583 representing an ATH in Ethereum network’s average transaction fees on September 2nd.
Ethereum network, which is currently running on Proof-of-Work consensus algorithm experiences a spike in transaction fees when activity on the network increases. The network incentivizes miners to secure and process transactions on the network through block rewards and transactions fees. Since Ethereum’s throughput is currently around 15 transactions per second (tps), it is unable to accommodate the heavy load. For context, at peak transaction times since the network creation, Ethereum saw 1.27 million transactions, and that was January 5th 2018. That was precisely during the ICO mania. We saw a new all-time high on September 17th, when the network processed 1.4 million transactions in a single day.
Ethereum network fees drop due to the slow down in DeFi transactions.
Without any doubt, DeFi has been the single source of Ethereum congestion this year. The yield farming frenzy that eclipsed the space necessitates that DeFi protocol users move their tokens around from one pool to another in search of high yields. Since these pools are smart contracts, it is only normal that they burn gas for their transactions. This, in turn, raises transactions fees on Ethereum network.
DeFi growth which blew the roof, however, saw a brief pull back on the 12th of September after TVL across protocols dropped below USD 10bn.
TVL has picked up since then and is presently above USD 11bn. While TVL is growing, transaction counts on Ethereum network have dropped below 966,000 necessitating a fee drop also. This could mean that yield farmers who engage in the act of liquidity mining are moving their assets around less.
To conclude with this, food tokens which were proliferating every day seem to have reduced. At least on Ethereum. It’s looking like Binance Smart Chain has become their newest destination with the likes of PancakeSwap and BurgerSwap opening the gateway on the network.
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