Ethereum Gas Prices Have Plummeted - But Is This Good or Bad News?
TL;DR
As of this writing, gas fees stand at ~$0.25 for sending ETH across the protocol; and a trade on Uniswap currently costs $2.47 - down from $4.17 in early September - a price not seen since the collapse of FTX in Oct 2022.
There are three main theories as to why Ethereum gas fees are so low right now.
Full Story
We've covered 'gas fees' plenty of times before, but to set the scene for this story it's important to know that gas fees are essentially transaction fees, made by users, to compensate for the compute power used to process each transaction.
Back in August 2021, Ethereum implemented EIP-1559.
Sounds complicated, but all that really means is that a fee-burning mechanism was introduced so that the higher the gas prices, the more ETH to get burned (i.e. permanently destroyed) and vice versa.
As of this writing, gas fees stand at ~$0.25 for sending ETH across the protocol; and a trade on Uniswap currently costs $2.47 - down from $4.17 in early September - a price not seen since the collapse of FTX in Oct 2022.
So, why the declining gas prices?
There are so many variables in markets that they're extremely difficult to understand. But here are some theories.
The Optimist: The upgrades like EIP-1559 and The Merge have had enormous benefits for the network, making it cheaper and more secure, leading to lower gas prices.
The Neutralist: Layer-2 scaling protocols (e.g. Polygon) have been so successful that they've taken significant trading volume away from the Ethereum protocol. Crypto is still fine and dandy, people are just opting for other protocols powered by ETH, rather than ETH itself.
The Pessimist: Investors are waiting for the next big thing in crypto. Until then, liquidity will remain low, and gas prices will continue to drop simply due to less and less demand.
The truth is, it's probably a combination of all of the above.
Is now a great time to transact on the Ethereum network?
That really depends on whether you take a 'glass-half-full' or 'glass-half-empty' kinda view.
¯\_(ツ)_/¯