Bitcoin transaction fees dropped below $1 for the first time since 2020. In addition to the `latest Bitcoin upgrades, the drop in transaction fees can be attributed to multiple factors, including falling market prices and lower mining difficulty.
Average transaction fees on the Bitcoin blockchain network dropped below $1 for the first time in two years, Cointelegraph said on August 22. At the press time, the fees stand at around $0.825.
A gas fee or transaction fee is what you pay for using the blockchain, following which you can transfer cryptos from one address to another. It’s noteworthy that Bitcoin is widely regarded as the ‘most expensive’ blockchain because of its huge transaction fee.
(Source: Blockchain.com )
Higher transaction fees make it difficult for users to use the blockchain. It is all a demand and supply game. If the network demand is higher, the transaction fee increases, and when the demand is low, the transaction fee reduces. Ethereum is supposed to be the cheaper alternative, but due to high demand, users have paid more than $5000 in gas fees for creating an NFT on the blockchain.
Bitcoin could achieve this due to two upgrades – the Lightning Network and the Taproot upgrade – which made transactions faster and cheaper over time. Various factors can be involved in the drop in the transaction fee, which could also be the crypto winter as all cryptos struggle to rebound.
In addition to the latest upgrades, the drop in transaction fees can be attributed to multiple factors, including falling market prices and lower mining difficulty. However, the difficulty of mining a new BTC block sees a steady recovery as miners gain access to cheaper hardware while recovering from the prolonged chip shortage.
According to Cointelegraph, August also marked the end of the three-month-long downfall of network difficulty — recovering back to 28.351 trillion from its freefall. Thanks to consistent community efforts, the Bitcoin network continues to display telltale signs of a healthy financial system.
Meanwhile, Ethereum is switching from Proof-of-Work to a Proof-of-Stake consensus mechanism that makes transaction fees cheaper. However, The Merge will not “significantly change any parameters that directly influence network capacity or throughput,” according to the Ethereum Foundation. This means there won’t be any change in the gas fees. It will all depend on demand and supply; when more people use the blockchain, the gas fee charges will be high; when less use it, the fee will reduce.