Users of Bitcoin and Ethereum seeking to transfer their funds can benefit from the low fees prevailing in both networks. On June 23, the average transaction fee for Bitcoin (BTC) dropped to $1.93, marking an eight-month low. Similarly, Ethereum transaction fees averaged $0.70 on June 22, a favorable comparison to the previous high of $2.50 in March.
Vitali Dervoed, the CEO and co-founder of the decentralized exchange Spark, shared insights with Cointelegraph. With a decade of experience in various financial sectors, he indicated that the fee reduction was not unexpected. Dervoed mentioned that following halving events, there is typically a temporary decline in mining activity as miners adjust to reduced profitability. This adjustment can lead to lowered fees by decreasing competition for block space.
Justin d’Anethan, the head of business development APAC at Keyrock, noted that factors beyond halvings have contributed to the fee decrease. He mentioned the surge in transactions in recent months due to Ordinals and Runes inscriptions, which seems to have slowed down, if not subsided.
Carlos Mercado, a data scientist at Flipside Crypto, pointed out Ordinals as a contributing factor to the fee decline. He remarked that while there were short-term spikes in onchain BTC activity and fees post-halving, narratives related to Ordinals and BTC inscriptions tend to fluctuate.
The decline in fees might benefit users, but it poses challenges for miners. Mercado highlighted that BTC fees were compensating for reduced block rewards, at least until recently. He emphasized the importance of miners recouping operational costs to maintain network security, especially with halvings cutting their revenue in half abruptly.
D’Anethan also discussed the impact on Keyrock due to fee fluctuations. While low fees do not directly affect their operations, miners may face constraints. He noted that although Bitcoin endures, miners are likely feeling financial pressure as the halving impacts their earnings, albeit somewhat mitigated by increased transaction volume initially.
Regarding Ethereum, the reduced fees are associated with the Dencun update in March. D’Anethan highlighted the dynamic nature of Ethereum’s fee structure, pointing out the shift of network traffic to layer-2 solutions like Arbitrum and Optimism, driven by the Dencun upgrade’s objective to enhance cost-efficiency.
Dervoed echoed similar sentiments, attributing Ethereum’s fee decline to the adoption of L2 solutions. With complex operations moving to L2 platforms, Ethereum’s primary chain has streamlined for basic transactions, resulting in lower fees.
The debate over the implications of low transaction fees varies among experts. Dervoed views the shift to efficient L2 solutions as a positive indicator, showcasing Ethereum’s progress towards scalability and technological advancement. He believes that while fee fluctuations may occur, Ethereum’s adoption of layer-2 solutions will sustain low fees, enhancing network efficiency without compromising security.
In contrast, Mercado adopts a more pessimistic stance, linking the decreasing fees on Bitcoin and Ethereum to potential long-term concerns. He expressed apprehension about inflationary pressures and the impact on miners if transaction fees or prices do not rise to offset decreased revenue from block rewards. Mercado’s analysis emphasizes the need for a balanced approach to maintain network security and sustainability amidst evolving fee dynamics.