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According to analysts, the falling price of Ethereum gas fees could be the result of waning interest in NFTs and Defi.
In the last 6 weeks, the Ethereum network could finally see a full transition from proof-of-work (PoW) to proof-of-stake (PoS) via The Merge. Meanwhile, during the last 38 days, Ethereum’s layer one (L1) on-chain transaction fees have dropped below the US$5 mark and tumbled even lower by the end of July. At the time of writing, the average Ethereum network fee is 0.00086 ether or US$1.46 per transfer. Median-sized fees are even less, as statistics show transfer fees have been as low as US$0.21 to US$0.576 per transaction on Sunday morning (EST).The Ethereum transaction fees reduction is happening after the Ethereum chain started addressing the scaling issue with its Ethereum 2.0, an Ethereum upgrade that is addressing scaling and the gas fee issues in the Ethereum ecosystem.
This is good news for Ethereum users, who have long and rightfully complained about the network’s fees. However, there are fewer users around to benefit. Costs are down because demand is, too. Despite declining use, Ethereum itself is increasingly seen as a bullish bet. Developers have formalized a timeline to transition the network to proof-of-stake (PoS) next month, which will radically change its cost structure – making it theoretically more efficient and cheaper to use.
What are the pros of investing in Ethereum?
Lower inflation risk: Inflation is a big talking point right now and Ethereum has a built-in strategy for this that isn’t as susceptible to tampering, reducing the risk of the value of your crypto decreasing.
Liquidity: One of the main reasons people are attracted to Ethereum is that it’s one of the most liquid cryptocurrencies, so you can quickly and easily exchange it.
Volatility: The volatility in the Ethereum marketplace could actually be a positive since smart investors can identify patterns and profit from the volatility.
The Long-Awaited Ethereum Merge
The Ethereum Merge, a long-awaited upgrade that will complete Ethereum’s transition from a proof-of-work (PoW) to a proof-of-stake system, is set to take place in September. In addition, The Merge will transform Ethereum’s monetary policy, making the network more environmentally sustainable and reducing ETH’s supply. Experts believe that after The Merge, Ethereum will have lower inflation than Bitcoin. Especially with fee burns, Ethereum will be deflationary while Bitcoin will always be inflationary. For Ethereum Classic, this merge provides a key catalyst, at least in terms of interest. Often looked at as Ethereum’s under-loved and under-respected sibling, Ethereum Classic is a fork of the Ethereum blockchain that came about as a result of an internal dispute among developers within the Ethereum team. Ethereum classic will remain proof-of-work, and as such, is now being viewed as a haven of sorts for Ethereum miners looking to pivot.
While Bitcoin will retain its function as digital gold, the researchers feel that Ethereum will still have “a larger adoption space” as the base layer of the decentralized finance (Defi) economy. The Merge won’t reduce Ethereum’s high transaction fees, which is still the main issue preventing Ethereum from scaling and actually outperforming Bitcoin.
Ethereum Killers are prepared
Ethereum, the second-largest cryptocurrency in the world by market capitalization, is like an app store. Developers can come in, build an application or a ‘smart contract’, and get others within the network to use it — just like one can only use Android apps on an Android phone, not an iOS device.
Because there’s a huge addressable market for a cryptocurrency that goes beyond simply being a store of value like Bitcoin, Ethereum also faces a more competitive market.
Its scalability issues — which is that gas prices jump whenever there’s a surge in users — and slower speeds have given room for others to carve out their niche, like Binance, Solana, and Cardano.
Why buy Ethereum?
Bitcoin has always been the biggest name in the sector, and Ethereum has consistently held second place behind the crypto giant. However, that could change soon. Ethereum has been gaining traction in terms of market share, quickly catching up to Bitcoin. While Bitcoin’s market cap still looms far above Ethereum, the gap has narrowed considerably over the past year.
Ethereum’s infrastructure could also help set it up for long-term growth. It’s the leading network for decentralized applications, such as non-fungible token (NFT) marketplaces and decentralized finance (DeFi) projects. The sky is the limit in terms of its potential, and the more developers build on the blockchain, the better chance Ethereum has of sticking around for the long haul.