The Ethereum ecosystem has been growing at an incredible pace, adding millions of new addresses every quarter. Its adoption is growing like never before, all thanks to the rise of Defi and NFTs. While the long-term viewpoint of Ethereum’s utility has not budged, its short-term scope is showing signs of growing pains. The transaction fees have shot up like anything in the first quarter of 2021.
Even if we consider the previous bull runs, we see a similar pattern in the mean and median fee of Ethereum. The rapid increase in the fees is partly due to the ETH price. The value of Ethereum is immense to the crypto world, and everyone in the industry understands its true potential. While the price kept on hitting new ATHs, the network was experiencing extreme congestion.
The Average Daily Gas Fess was 65$ on 19th May, and it now came down to 1.13$. Why did this change so suddenly?
The recent market correction is one of the main reasons why the Ethereum Gas fees came down to such levels. It is not transaction complexity because we see the amount of gas used per transaction declined in the last 12-18 months.
Defi has its majority share for high Ethereum fees. Defi projects like Uniswap, Compound, and AAVE have garnered millions of users to make transactions, which has caused extreme congestion on Ethereum Network. If we see the graph below on ETH block fullness percentage, we will observe that blocks have consistently been about 95% full or more.
So- what has changed in the last few weeks? The correction lowered the prices significantly so that helped in a small way, but the main change observed on-chain is that the transactions done on Polygon is considerably higher than that of Ethereum’s blockchain.
These scalability projects have taken the load of Ethereum’s network, and it is clearly visible on the daily transaction chart. The block size reduced from nearly 62k to 48k, which eventually lowered the number of new addresses.
If we consider Polygon for comparison, we see almost five times more transactions taking place daily. It is 7 million transactions per day for Polygon, whereas it is only 1.1 million for the Ethereum network. It is roll-ups like these that can increase scalability without sacrificing security and decentralization. The roll-up or sidechain ecosystem is proving to be the real answer right now that can potentially get us to 100,000 TPS by late 2022.
The gas fees will likely not shoot up like before, as we are seeing new layer two projects facilitating the scalability issue. Can Ethereum 2.0 fast-track the paradigm shift that is happening now? It is a bit premature to say it can solve the high transaction fees, but it will definitely help relieve the congestion contributing to high fees.
At the end of the day, transaction fees will only go down in the long term, considering Ethereum will be the best settlement layer and not just a smart contract platform.

Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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