Transaction fee on the Bitcoin blockchain network dropped below $1 on Monday for the first time in two years, according to crypto analytics firm blockchain.com. As of writing this article, the Bitcoin transaction fee stands at $0.825.
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 should be noted that Bitcoin is widely regarded as the ‘most expensive’ blockchain because of its exorbitant transaction fee.
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 fee 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. There can be various factors involved in the drop in the transaction fee, which could also be the crypto winter (market crash) as all cryptos struggle to rebound.
According to Cointelegraph, the major reason could also be the end of the prolonged semiconductor shortage, which has allowed miners to gain access to cheaper hardware and mine more and more Bitcoin.
Meanwhile, Ethereum is switching from Proof-of-Work to a Proof-of-Stake consensus mechanism that is said to make transaction fees cheaper. However, according to the Ethereum Foundation, the organisation behind the Ethereum blockchain, The Merge will have no “significantly change any parameters that directly influence network capacity or throughput”. 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.