As non-fungible tokens (NFT) surged in popularity throughout 2021 and the beginning of 2022, gas fees skyrocketed, but are now as low as 50 gwei.
The fees on the Ethereum blockchain reached a six-month low on March 9, 2022, according to CryptoRank. The previous low was seen in August 2021. Gas fees refer to the amount of “gwei” required to complete a transaction on the Ethereum network, a figure that has been dropping since Jan. 10, 2022.
The cryptocurrency data aggregation tool CryptoRank confirms that gas fees on the Ethereum network are low again, following spikes in September and December 2021, as interest in non-fungible tokens and decentralized finance, surged in the third and fourth quarters of last year.
DeFi and layer-2 Ethereum influence
A potential reason for the drop in gas fees is the introduction of decentralized finance applications to other networks, like Terra, Binance Smart Chain, and Avalanche. Recent data from DeFi Llama certainly points to this, with Ethereum accounting for 54.62% of the total value locked in DeFi, followed by Terra at 12.79%, Binance Smart Chain at 5.94%, and Avalanche at 5.42%.
Increases in transaction activity on layer 2 solutions like Arbitrum and the ZK-rollup are also increasing, moving activity off the main Ethereum network, possibly lowering fees on the mainnet. Layer-2 transactions are performed off-chain, and then posted to the Ethereum mainnet. However, this hypothesis seems doubtful considering that the value of ETH locked up on layer 2 peaked at the end of January 2022, but the median cost of gas at that time did not immediately correlate.
NFT data shows closer correlation to gas fee decline
Interest in nonfungible tokens specifically rose between December 2021 and the beginning of February 2022, which was reflected in part by the number of Google searches on the topic.
Celebrity interest from Eminem, Paris Hilton, and others fueled the January 2022 surge. Interest in NFTs has wavered since then, with total transaction volume per day on OpenSea dropping $290M on March 8, 2022, from its peak of close to $360M on Feb. 1, 2022.
Between Feb. 1, 2022, and Feb. 6, 2022, the median gas fee dropped from 134 gwei to 65 gwei. A token swap on the Ethereum network now costs approximately $15, a far cry from the $200 peak between September and November 2021. The number of unique NFT buyers on OpenSea dropped from approximately 50,000 to 30,000 over the same period.
The average gas price to transact on the Ethereum blockchain at the time of press is 50 gwei, having previously dropped to 19 gwei on March 5, 2021.
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