Aside from timely updates, the drop in transaction fees can be attributed to several factors, including falling market prices and decreasing mining difficulty.
The average transaction fee on the Bitcoin (BTC) blockchain has fallen below $1.00 for the first time in over two years, further bolstering its potential as a viable mainstream financial system.
High transaction fees on blockchain networks work against users, especially for low value transactions. For example, transaction fees on the Ethereum blockchain skyrocketed several times during the hype around non-fungible tokens (NFTs), which caused stress for ordinary users.
While the Bitcoin ecosystem has historically endured its fair share of high transaction fees, timely upgrades including Lightning Network and Taproot ensure faster and cheaper transactions over time. On Monday, the average Bitcoin transaction fee dropped to $0.825, last seen on June 13, 2020.
Average bitcoin transaction fees over the last 3 years. Source: Blockchain.com
Aside from timely updates, the drop in transaction fees can be attributed to several factors, including falling market prices and decreasing mining difficulty. However, the difficulty of mining a new BTC block is steadily recovering as miners gain access to cheaper hardware, recovering from a constant chip shortage.
Bitcoin network difficulty graph. Source: Blockchain.com
As seen above, August also marked the end of a three-month decline in network problems, recovering from a free fall to $28.351 trillion. With consistent community efforts, the Bitcoin network continues to show clear signs of a healthy financial system.
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While users expect each network upgrade to reduce gas fees and transaction speeds, not all upgrades serve the same purpose. For example, Ethereum’s most anticipated upgrade, The Merge, will not lower gas fees.
As the Ethereum Foundation explained:
“The merger is moving away from using proof of work and moving towards proof of stake to reach consensus, but does not significantly change any parameters that directly affect throughput or network throughput.”
The merge upgrade includes connecting the existing Ethereum mainnet execution layer to the Beacon chain, effectively removing the need for energy-intensive mining.