Transaction Fee Was Down on the Ethereum Network And Back Up Again

On May 10, 2022, the transaction fee dropped.  Reportedly, The Coin Metrics Gas Fee Tracker reported that the average gas fee in April was as high as $42.  As on May 10, 2022, the gas fee was trending at $12.  This was a 71% decline in the transaction fee.

However, the gas fee climbed back up today.  At the time of writing, Ethereum Average Gas Price is at a current level of 147.32, up from 61.54 yesterday and down from 298.77 one year ago. This is a change of 139.4% from yesterday and -50.69% from one year ago.

If the Ethereum gas fee are very high, it can be practically impossible to use it for transactions considering the affordability factor.

Gas refers to the fee required to conduct a transaction on Ethereum successfully.  Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network.

Since each Ethereum transaction are based on PoW, it requires computational resources to execute, each transaction and therefore requires a fee.

However, now, the Ethereum network is transiting to use PoS. Staking is the act of locking up ETH to get the right to participate in block proposals on the network. Those who stake sufficient number of ETH are entitled to become validators.  Proof-of-stake is the underlying mechanism which activates validators upon receipt of enough stake. For Ethereum, users will need to stake 32 ETH to become a validator. These validators are chosen at random to create blocks and are responsible for checking and confirming blocks they don’t create.

PoS is expected to be a better method of solving cryptographic problems. The move of Ethereum from PoW to PoS has been many years in the making. With PoW transactions on the Ethereum Network are tediously slow. To improve scalability Ethereum is slowly working towards disassociating from proof-of-work mining to PoS.

PoS does away with miners and miners are replaced with validators. Validators get block rewards for confirming transactions.  Instead of using energy intensive methods like mining with PoW to validating transaction, users are now willing to invest in the native coin to become validators. A single Ethereum transaction under the PoW consensus makes use of 113-terrawatt hours per year.

So, the issue of power consumption and therefore the high gas fee is expected to come down with PoS. The expectation is for Ethereum to be able to provide for 100,000 TPS and thus improve transaction speed. Delays and congestion is a major issue – if Ethereum fixes them without security issues, this can evolve to be the most promising network.