We have a huge hype all around again this year memecoins and that caused transaction fees on both Bitcoin (BTC) and Ethereum (ETH) to go through the roof. That hype is now starting to cool down and we see transaction costs falling back to more normal levels. For example, for Ethereum, transaction costs are currently at their lowest point in two months.
That is a positive development for the network, because it is ultimately a network that you should be able to use. The higher the transaction costs, the more difficult that is.
Average transaction costs
The average transaction costs on Ethereum (seven-day average) even shot through to over $20 per transaction this year. The situation has since returned to normal and we have reached approximately USD 7.50 per transaction. That still seems a bit high for a network you’d like to deploy at scale, but it’s at least a lot better than what it was earlier this year.
The last time transaction fees on Ethereum were as low as today was mid-April. On April 17, you paid an average of $6.57 for a transaction on Vitalik Buterin’s network. In that respect, it is also important that more and more people start working on Layer-2 solutions.
These are solutions that ensure that the main Ethereum network is spared. The majority of transactions take place outside the blockchain, which is good for the health of the network. This means that the network itself has to process fewer transactions and costs are reduced.
Memecoins as the culprit
It seems that it was mainly the memecoins that were to blame for the increase in transaction costs on Ethereum. In particular, the hype surrounding PEPE caused the transaction costs on the Ethereum blockchain to skyrocket.
The fact that memecoins were popular on Ethereum also caused the volumes of DeFi platforms to rise sharply compared to centralized exchange platforms. The volume ratio increased to more than 20 percent in the April-May period of 2023, which is quite a high percentage throughout history.