London Hard Fork is affecting Ether’s prices already, but gas fees stabilisation will take longer
- The Ethereum-based cryptocurrency Ether’s prices have improved substantially, but gas fees — the amount charged to conduct a transaction — will take longer to stabilise.
- Ethereum’s average gas fee was pegged at 41 Gwei at 1:45 pm IST on August 12.
- The network has burned over 31,000 ETH in the seven days following the
LondonHard Fork update.
The update is expected to reduce gas fees — or transaction fees — on the Ethereum network, a problem that has plagued the platform since its inception. It does this by burning most of the gas fees involved in transactions and hence taking them out of the active circulation.
The computation required for authenticating Ethereum transactions is called gas, and the fee required for these transactions is called gas fees.
AdvertisementBurning gas fees also limit the supply of Ether, the cryptocurrency that facilitates the Ethereum network, making the available tokens more valuable.
According to Etherchain’s burn tracker and ultrasound.money, over 31,000 Ether tokens have already been burned, at a rate of 2.51 ETH per minute.
Gwei is a smaller denomination of currency on the Ethereum network, which is used to determine the gas price. And, as of 12 August, at 1:08 pm Indian Standard Time (IST), Ether’s average gas fees was pegged at 33 Gwei, according to Etherscan’s tracker. This is pretty much in the normal range that you would see before the update.
Deflationary effect on Ether
A report by Coindesk two days after the update noted that 5,000 ETH had been burned at the time. A week later, data shows that the number has grown by over six times. Burning these tokens was expected to create a deflationary effect on Ether, driving its price upwards — and, that’s exactly what seems to be happening.
Data from Coinmarketcap shows that Ether’s price rose from around $2,700 on August 4 to over $3,100 today. “A spike in the Ethereum transaction fee burn rate has resulted in at least two hours when the supply was deflationary. The network has come under heavy load over the past couple of days, which has resulted in a lot more gas being burnt,” Cointelegraph reported yesterday.
Gas fees yet to fall substantially
That said, the gas fees haven’t really lowered just yet. And some experts have said that it may not happen anytime soon. “It’s not that easy for the average user to predict what the fee will be for the next one or two minutes,” Anonymous Ethereum user Face Shaver told Coindesk. Shaver explained that since the fee is as volatile as the price of Ether itself, it’s difficult to predict what fee you will encounter when your transaction goes through.
For instance, the average gas fee had gone up to 41 Gwei at 1:45 pm IST, while it dropped again to 39 gwei at 1:48 pm IST, while writing this story.
Advertisement“If you are [trying] to get in, either in this block or the next block, the most [fee] volatility you face is ⅛ of the current base fee, but if you think of the average user as someone who is price sensitive, and so is willing to wait one, or even something like three minutes for their transaction to go through … then you have to consider what happens to the fee in next three minutes,” Shaver said.
To be fair, no one expected the gas fees to stabilise overnight. “The London Fork is going for the proof-of-stake model, which will ultimately bring down the gas fees on Ethereum. Overall, for the ecosystem, it will be good news for the ecosystem of app developers, (people selling) NFTs and more,” Toshendra Sharma, founder and chief executive of Indian NFT platform NFTically, told Mint on August 5. “The cost will probably go down to about one-tenth of the current fees," said Anuj Kumar Kodam, founder of another Indian NFT platform called Wall.app, told the publication.
For a more in-depth discussion, come on over to Business Insider Cryptosphere — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.
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