As we inch closer to the London hard fork, numerous investors expect the extremely high gas prices of Ethereum to drop, which is a prospect that many have been looking forward to for quite some time now. As such, the gas prices were observed to have been dropping at a somewhat accelerated pace as of late, and ETH’s price has also dropped a little bit since yesterday, down by 4.7%. The overall cost of actually using Ethereum’s network has additionally decreased.
As per a report provided earlier today by Coin Metrics, a cryptocurrency market research organization, the gas fees’ average price has reached its lowed point ever since March of last year.
Understanding the metrics
For those who might be unaware, the term ‘gas’ in the abovementioned context essentially means the transaction fee that is currently required to be paid in order to utilize the Ethereum network. Right now, it is somewhere between the gwei range of 15 to 30. This range is a decrease of approximately ten times comparative to the previous amount observed back in April, which was around the time when there had been a huge spike in the transaction fees, going well into double-digit territory in USD. This was also when ETH’s price had skyrocketed.
In mathematical terms, one gwei is merely a fraction of 1 ETH, which would mean 0.000000001 ETH. This is otherwise referred to as being just a fraction of the penny. However, this has caused many to wonder that if the gas prices are indeed at such a low amount, then why would the current cost be at a near-average of just over $8 for transactions, especially since this is a huge increase from a previous low of $2.31 which was the cost just a couple of weeks ago.
The reason for this is because the two metrics are often related, albeit distinct in nature. The gas price is taken and then subsequently multiplied by the total amount of gas that would be utilized, which would then help determine the transaction fees. With this understanding in mind, it is then easy to note that various types of transactions would certainly need different amounts of gas in order to function.
Apart from the aforementioned information, there are two other factors which we must consider. Firstly, the gas prices had actually begun decreasing towards the end of April, which was before the recent crash happened. The upshot was, therefore, that an increased number of transactions could now be included within each block, which eased demand.
Secondly, arbitrage bots have constantly been trying to derive profits on various decentralized exchange transactions, and these bots have normally boosted fees as a result. However, this activity is reportedly going to be moved off of Ethereum’s blockchain and shifted to the parallel chains.
Ultimately, the change in fees could only be temporary as the upcoming London hard fork might change things once again.