Ethereum’s daily transaction fees reached an eight-month low, dropping to 1,719 ETH (approximately $2.1 million) on August 27.
The decrease in gas fees can be attributed to low network activity and the rise of layer 2 scaling solutions.
According to data from on-chain analytics firms CryptoQuant and IntoTheBlock, Ethereum became the cheapest it has been since December 26.
The bearish market outlook has played a significant role in the sharp decline of gas fees. Reduced activity in decentralized finance solutions leads to lower gas fees, while increased activity often results in network congestion and higher fees.
Year-to-date data since May 5 shows that daily transaction fees on Ethereum have decreased by 83%, from 16,720 to 1,719 ETH. Despite the popularity of friends.tech, launched on August 10, fees remain low, highlighting the importance of scaling solutions.
Friend.tech has gained massive traction with over 100,000 users and $2 million in revenue in its first month of operation, indicating that network congestion is now a thing of the past.
David Lawant, Falcon X’s head of research, noted that the reduced fees recorded across the network are in contrast to the times when projects like CryptoKitties would cause congestion on the Ethereum network.
“Ethereum L1 fees since friends.tech launched on August 10 are 25% lower than the average for the year until then, which is in stark contrast to the times when the success of early NFT application CryptoKitties or the latest Yuga Labs NFT drop would commonly temporarily clog the Ethereum network.”
Layer 2 saves the day
The Ethereum network has experienced significant development and is a leader in smart contract development, hosting a large number of decentralized applications (Dapps) and decentralized finance (DeFi) protocols.
While this led to high adoption and a surge in the asset’s price, it also resulted in expensive gas fees and slow transaction speeds during congestion.
Ethereum co-founder Vitalik Buterin and other developers have emphasized the need to upgrade to Ethereum 2.0, which will transition the network to a Proof-of-Stake (PoS) consensus mechanism, eliminating miners.
These upgrades also include layer 2 solutions that relieve pressure from the network, reducing transaction speed and fees without compromising security.
In recent years, layer 2 networks have witnessed mass adoption, with multiple developers deploying projects on these solutions.
Friend.tech operates on Coinbase’s layer 2 chain, Base, which has contributed to its smooth operation despite its considerable traction.
On-chain data from IntoTheBlock also shows that layer 2 scaling solution Optimism mainnet reached a new all-time high of 900,000.
With the development of these solutions, several analysts have referred to Ethereum as “unstoppable” in response to claims from rivals like Cardano (ADA) and Solana (SOL) as “ETH killers”.