Ethereum miner fees drop by 60%, but the network is still congested

The sharp drop in the price of Ethereum this week has brought about a good thing, that is, the income of Ethereum's miners has begun to fall sharply, and transaction fees are much cheaper than before the plunge.

According to data from BitInfoCharts, on Wednesday, Ethereum's average transaction fee reached 14.5 US dollars. This is the highest average cost of Ethereum transactions since 2018. (For reference, when people want to transfer funds to different wallets or use it with different protocols, they must pay transaction fees on Ethereum. This means that the average cost of doing so is $14.5). But then, the price of Ethereum, the second largest cryptocurrency by market value, fell from $487 on Wednesday to $380 on Friday, a drop of more than 20%. With the decline in average transaction fees, miners fell below $6 last Friday, a drop of 60%.

Please note that the collapse of Ethereum is not exactly the same as transaction fees. The price of Ethereum continued to fall today to $317, which is 19% lower than the drop last Friday. But the average cost of Ethereum transactions rose slightly, reaching $7.6 yesterday. The news of the fee drop does not mean that the network is no longer congested and the number of users has dropped. Even if the rest of the week is considered an outlier, yesterday's Ethereum average transaction fee was $7.6, which will still be the highest level since 2018. These ultra-high transaction fees are partly due to increased activity on Ethereum. Since the rise of DeFi (that is, decentralized finance) this summer, people's interest in DEfi tokens has continued to grow. This kind of decentralized finance does not have custodial financial services, such as loans and equity, which are all completed on decentralized exchanges. Since June, investors have invested US$8 billion in its smart contracts. Nowadays, almost all major DeFi protocols run on the Ethereum chain-so the amount of Ethereum activity has increased. But due to the explosion of Ethereum, these transaction fees are also incredibly high. The network utilization rate has been hovering around 96%. If the utilization rate remains high, the network will be blocked and unusable. Expansion solutions are under development. Ethereum 2.0 is an upgraded version of the blockchain that will greatly increase its capacity. The technology will be launched later this year.