Ethereum is one of the most popular blockchains for NFTs, but limited capacity and high gas fees have made Ethereum NFTs prohibitively expensive for many NFT enthusiasts
Why are gas fees at a six-month low?
In more ways than one, NFTs have become the go-to investment for many crypto enthusiasts, especially over the last year. As cryptocurrency market caps crashed, the value of the NFT market exploded beyond expectations.
The growth has been remarkable that OpenSea crossed $5 billion in revenue in January 2022. Still, as the NFT market grew, one thing remained relatively constant, the exorbitant Ethereum gas fees. A quick explanation on how gas fees work in the Ethereum blockchain; to process a transaction, you need to pay a gas “processing” fee, but when many people want to process transactions at the same time, there’s a bidding war. As time goes on, the gas fees fluctuate based on demand, and on 9 March 2022, the gas fees on the Ethereum blockchain dropped even further.
According to fresh data from Arcane Research, the average cost of an Ethereum transaction is 0.0045 ETH ($15), which is the lowest since August 2021. Additionally, this is not an isolated incident; there’s been a correlation between the drop in Ethereum cryptocurrency and the price of Ethereum transactions.
As the Ethereum gas fees reduce, it has brought many questions for the general NFT market.
The effects of less on-chain activity
For a considerable amount of time, the Ethereum blockchain has gotten a lot of bad press for excessive network costs caused by overburden on the network. As of writing this piece (early hours of 9 March), the average gas price on this blockchain was 0.0042 ETH.
One of the possible reasons for the reduction in gas fees might be the improved adoption of L2 protocols such as Polygon, Optimism, Arbitrum, and more. As L2 protocols increase in popularity and critical acclaim, a reduction in on-chain transaction activity is one of the possible reasons for the decrease in transaction fees on the Ethereum blockchain.
Ethereum has cemented itself as one of the most popular blockchains for NFTs. It hosts a myriad of NFTs and DeFi applications, and the sustained interest in NFTs and DeFi is one of the reasons for extended periods of high gas fees.
Is the NFT market slowing down?
Saying that NFTs have been crazy over the last few months will be an understatement; NFTs have been the rave, and millions of people have jumped on the NFT bandwagon over the last few months. Many people in the industry believe that gas prices are on a downward spiral because the general crypto market is entering a “bear market.” Such an occurrence can reduce investor interest and reduce transaction volumes and a possible loss of assets value. Speculations will make way for reality as time goes on, and the gas fee trends will hopefully make more sense.
