Ethereum gas fees plummet to six-month low amid waning interest in DeFi and NFTs

• Ethereum’s gas fees have plummeted to their lowest since August 2021.
• According to analysts, the latest trigger for the fall could be due to the waning interest in NFTs and DeFi.
• The ongoing pressures of inflation concerns, the Russia-Ukraine conflict, and ‘Ethereum Killers’ may also contribute to the dip in gas fees.

The cost of transactions on the Ethereum network, the world’s first smart-contract blockchain platform, has dipped to its lowest in six months. Gas fees were already slipping as the price of Ether (ETH), the Ethereum network’s native token, was taking a beating in the market amid the Russia-Ukraine conflict and inflation concerns.

At the same time, as macroeconomic conditions tussled with cryptocurrencies, the driving force behind Ethereum’s all-time-high in $4,770 in November — non-fungible tokens (NFTs) and decentralised finance (DeFi) — is waning.

Leading global banks like JPMorgan and Morgan Stanley have pointed out that while Ethereum does have the first-mover advantage in the smart contract space, the surge of alternative platforms offering the same service at lower costs and faster speeds is chipping away at its dominance.

Lower price, lower transaction costs

Since gas fees are calculated in Gwei — a smaller denomination of ETH — when the price of the token falls, so do the gas fees.

Since the start of the year, the overall cryptocurrency market has seen mass liquidation with its value now sitting below the $2 trillion mark. This year, so far, the price of ETH alone has plummeted by over 30%.

Last year, the hype around NFTs and DeFi led to a jump in the number of users in the network. With more people using ETH to make transactions and buy NFTs, the token's price naturally increased alongside gas fees.

Come 2022, while DeFi and NFTs are still making headlines, the hype around the two is not as high as it was last year, according to CryptoRank.

Solana, Cardano, and other ‘Ethereum Killers’

Ethereum, the second-largest cryptocurrency in the world by market capitalisation, is like an app store. Developers can come in, build an application or a ‘smart contract’, and get others within the network to use it — just like one can only use Android apps on an Android phone, not an iOS device.

Because there’s a huge addressable market for a cryptocurrency that goes beyond simply being a store of value like Bitcoin, Ethereum also faces a more competitive market.

Its scalability issues — which is that gas prices jump whenever there’s a surge in users — and slower speeds have given room for others to carve out their niche, like Binance, Solana, and Cardano.

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