Ethereum’s network fees have reached a new low for 2023, according to on-chain data. The average transaction fee on Ethereum was only $0.77 on October 4, 2023, the lowest since November 2022. This is a significant improvement from the record high of $66.5 on May 19, 2023, when the network was congested by the market crash and the high demand for DeFi applications.
The decrease in fees is mainly due to the implementation of EIP-1559, which introduced a base fee that is burned and a tip that is paid to miners. This mechanism reduces the volatility and unpredictability of fees, as well as the inflation of ETH supply. Since EIP-1559 went live on August 5, 2023, more than 300,000 ETH have been burned, worth over $1 billion at current prices.
Another factor that contributes to the lower fees is the adoption of layer-2 solutions, such as Arbitrum, Optimism, and Polygon. These solutions allow users to perform transactions on a second layer that is faster and cheaper than the main Ethereum network, and then settle them on the main chain later. According to L2Beat, more than $3 billion are locked in layer-2 protocols as of October 5, 2023.
The lower fees could also have a positive impact on Ethereum’s price, as they make the network more accessible and attractive to users and developers. Ethereum has been recovering from the recent dip below $2,000 and is currently trading above $1,600. Some analysts predict that Ethereum could reach new highs by the end of the year, especially after it successfully transitioned to proof-of-stake with the merge.