Gas fees or transaction costs on the Ethereum blockchain have dropped significantly over the past month.
According to The Block’s Data Dashboard, the average transaction fee on Ethereum is now around $4.5 from nearly $45 a month ago — a whopping 90% decline.
The average transaction fees are now at a six-month low, per the Data Dashboard. (The data is a 7-day moving average (7MDA), meaning it is the average of the last seven days and indicates a short-term trend).
So why have the gas fees declined from a record high just a month ago? There are several factors at play.
First, there has been a notable drop in Ethereum transactions in recent weeks. Both decentralized finance (DeFi) and non-fungible token (NFT) transactions have declined with the recent market crash.
Daily transactions on Ethereum, for instance, have fallen to about 1.2 million versus 1.65 million a month ago. NFT transactions and volumes have also declined, per The Block’s Data Dashboard.
Another factor behind the lower gas fees is the growing usage of Layer 2 scaling solution Polygon (formerly Matic Network). The number of transactions on the Polygon network has increased by a notable amount in recent weeks.
From about 1.5 million, daily transactions on Polygon are now nearly 7.5 million, according to the tracker PolygonScan. That is over five times more than the number of daily Ethereum transactions.
Polygon is a proof-of-stake (PoS) blockchain versus Ethereum, which is currently a proof-of-work (PoW) blockchain,