According to the Ethereum Gas Report by analytics provider Coin Metrics, median gas fees on the Ethereum platform have been consistently over $10. For most of 2021, the average Ethereum transaction fee just recorded $5.70.
Coin Metrics Reports on Ethereum Transaction Fee
The Ethereum transaction fee is at the highest-ever levels. According to the report, the increase in ETH prices themselves will make gas more expensive. Since the beginning of 2021, ETH has hiked approximately 125% of the current prices despite a correction of 19% from its all-time high of $2,050. Meanwhile, the median gas price has shown a 532% surge.
Another reason for high fees is because the blocks are consistently full. More than 90% of blocks are full since mid-2020. However, till March 2021, ETH blocks are nearly 97-98% full.
A simple ERC-20 token transfer requires a less complex smart contract operation for the automated market makers. While different types of transactions require different amounts of gas. It is noted that the higher the number of transactions results in high gas fees rather than DeFi being the root cause of the high gas fees.
The report reads:
“Since January 2020, the amount of gas used per transaction has trended downwards. This shows that increased transaction complexity is not responsible for high transaction fees.”
EIP-1559 Is Unlikely to Solve the Problem
From the report, the highly anticipated Ethereum Improvement Proposal EIP-1559 network upgrade, designed to change the auction mechanism and burn some of the Ethereum gas fees is unlikely to solve the high gas cost problem. The only scaling solution available is the true long-term fix.
Coin Metrics further explained that EIP-1559 will only help to make fees more predictable. As the underlying cause of high Ethereum gas fees is the scalability problem.
According to the report,
“Miners naturally prioritize the transactions with the highest gas prices since they will earn them more money if these transactions are included.” “If Ethereum can only process a few hundred transactions (on average) per block, there’s going to continue to be high fees as long as DApp usage keeps increasing. Gas prices will continue to be high as long as there’s high competition for block space.”