The Ethereum (ETH) blockchain continues to achieve several milestones amid ongoing development that seeks to transition the network to the proof-of-stake (PoS) protocol.
Indeed, as of August 2022, the network recorded its lowest average transaction fees of $3, the lowest level since December 2020, according to Kaiko’s research shared with Finbold on August 4.
The transaction fees had peaked in May 2022 to almost $200, correlating with the Bored Ape Yacht Club land sale.
Drop in transaction fees to drive ETH adoption
The drop in transaction fees is a relief to the Ethereum network after the community previously raised concerns over the fee that was considered prohibitive. Consequently, the low fees are likely to drive the adoption of the network in sector like decentralized finance (DeFi) and non-fungible tokens (NFT)
Interestingly, the researchers noted that the drop in transaction fees comes amid plunging trading activity on decentralized exchanges while the number of trades has surged.
According to the research, the drop in transaction fees has emerged even during the bear market and has benefited elements like decentralized finance.
“In bear markets, volumes plummet on centralized exchanges as general interest among the public wanes. DeFi, however, still has plenty of use cases during a bear market, and we can see that one factor of on-chain activity is Ethereum transaction fees, rather than general interest,” Kaiko said.
Ethereum preparing for Merge upgrade
The latest milestone comes ahead of the Merge upgrade slated for September, where the network will shift from the energy-intensive Proof-of-Work (PoW) mechanism.
Notably, the Ethereum network is betting that the Merge will deflate token supply and drive the price up. If ETH’s price rises while network demand surges once the proof-of-stake Beacon Chain takes over the network’s economic activity, Ethereum may experience swiftly rising gas fees.
Ethereum rallies ahead of the Merge
Since the Ethereum team shared an update on the Merge update, the cryptocurrency has made slight gains, with analysts projecting that the upgrade will propel the second-ranked cryptocurrency to new heights.
As per Finbold’s report, once the Merge is rolled out, it will likely act as a catalyst that drives Ethereum into a global institutional-grade asset. Notably, Merge’s potential seems to be helping Ethereum beat Bitcoin (BTC) in certain metrics. For instance, on August 1, Ethereum’s open interest flipped to Bitcoin for the first time.
Although the asset has corrected slightly in August, the general market sentiment remains bullish regarding Ethereum’s prospects.