Ethereum gas prices are falling significantly, active ETH addresses now also less than active BTC addresses: report
Nate Maddrey and the other researchers Coin codes Note that Ethereum (ETH) gas prices have fallen to their lowest level since March last year.
Although the average gas price consistently hit 150-200 GWEI a few months ago, the average gas price has now “dropped to the 15-30 GWEI range since late May,” the Coin Metrics team confirmed in its latest status of the network audit report.
While it may appear as if the decline in ETH gas price corresponded to the price crash of Ethereum, the gas price actually began to decline in late April 2021, “long before the crash,” the Coin Metrics team announced and posted found that the average gas price was “as low” as 40 GWEI on May 1, 2021. “”
The report also mentioned that the gas then temporarily returned to 250-300 GWEI on March 12 and 19, two of the worst days of the crash. But when carefully examined, the large price spikes “were caused by extreme circumstances and were relatively short-lived,” said Coin Metrics researchers.
They also found that on May 19, 2021 around 11:00 UTC, the average gas price “suddenly rose from below 100 GWEI to over 2,000 GWEI in less than two hours” and then “dropped to around 300 GWEI for a few hours” . later.”
The report further noted:
“The extreme gas peak occurred during one of the worst flash crashes in the history of ETH, when the price fell from around USD 3,400 to below USD 1,900. The sudden crash sparked a DeFi liquidation spiral that escalated gas prices as investors desperately tried to avoid liquidation. “
An AAVE report reveals that May 19th was “the largest one-day liquidation sum in AAVE and Compound history.” Aside from the “relatively extreme” circumstances of May 12th and 19th, gas prices have “mostly trended down,” the Coin Metrics team confirmed.
They also found that several factors “together contributed to the decline in average gas prices”. First, the Ethereum gas limit “was raised to around 15 million on April 22nd.
The report also found that Ethereum’s scalability solutions have really picked up speed “since late April”. Polygon, a sidechain scalability protocol for Ethereum, has “gained momentum in recent months, including adoption by AAVE and other DeFi protocols,” the report noted, adding that a referee?, which uses optimistic rollups for scalability, was introduced in late May this year.
The Coin Metrics team also noted that “more and more transactions are moving to these scalability solutions, which is helping to remove more bottlenecks in Ethereum and further reduce gas prices.”
The report further revealed:
“Flashbots is helping to remove DeFi arbitrage bots from the Ethereum blockchain. With the advent of decentralized exchanges (DEXs) like Uniswap, arbitrage bots have made a significant contribution to high gas prices. Since DEX trades are visible in the mempool and chain, bots monitor incoming trades and then try to push them to the top for arbitrage or other profit opportunities. “
The report also indicated that the timing of these types of trades is “critical, so these bots are usually willing to pay extremely high gas prices in an attempt to outbid each other and have their transaction confirmed first”. However, Flashbots have begun “moving this bidding process to a parallel chain outside of the main Ethereum chain,” as the report noted, adding that this “has helped reduce gas wars against ETH and lower the overall price of gas” .
The report continued:
“Lower gas prices have contributed to a decrease in total ETH fees over the past two months. But with EIP-1559 slated to go live in early August, there is another potential consequence of lower gas prices: fewer transaction fees that will be burned after EIP-1559 launches. “
The report clarified that there is no way of actually knowing “how exactly the percentage of the fees will be burned compared to that used for tips once EIP-1559 goes live”.
Although the estimated annual inflation rate could have fallen to less than 2% during the high fees in March and early April, it has now “risen to over 3.5% after the fee decline in May,” the report noted, adding that this would still be “well below the ETH’s current annual inflation, but it would not be as low as previously estimated.”
But fees are likely to continue to “fluctuate over time,” the Coin Metrics team believes, also noting that “when total fees finally rise again, ETH annual inflation will fall thanks to the EIP-1559 fee-burning mechanism”.
The report also mentioned that BTC now “has more daily active addresses than ETH after ETH briefly surpassed BTC last week”. BTC usage had “decreased last week as the average time between blocks increased, resulting in fewer blocks than normal being added to the blockchain,” the report added.
The Coin Metrics team also mentioned that the increase in block time is likely due to a decrease in hashrate (amount of computing power that secures the Bitcoin network), which can lead to “fewer blocks being mined”. The BTC hashrate “stabilized last week after falling to its lowest level since 2019 on June 27,” the report said.
The report also mentions:
“Bitcoin’s difficulty decreased by about 28% on July 3rd, which is the largest downward adjustment in difficulty in Bitcoin’s history. Although the hash rate has dropped relatively sharply in the last month, Bitcoin was designed to adapt to sudden changes and stay secure. “
The report added:
“The difficulty adjustment comes after the time between Bitcoin blocks briefly exceeded 23 minutes last week, its highest level since 2010. Bitcoin’s average block time increased in June, likely due to the ongoing migration of miners from China due to newer stricter ones Regulations. The average block time has dropped to around 658 seconds since the difficulty adjustment, much closer to the 10-minute goal. “
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