Why transaction fee on Ethereum blockchain network is decreasing?

The transaction fee on the Ethereum Blockchain network has gone down over the last few weeks, despite the total number of transactions on the Ethereum network being increased, showing a new data published by Coin metrics gas fee tracker.

As per the date, the average gas fee in April stood as high as $42. However, the average gas fee is around $12, which means a 71 percent decrease in the transaction fee.

This comes as Ethereum moves to Ethereum 2.0, changing its consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS).

As per a report, the total value of staking coins has now over-increased $33 billion, for which the community has staked over 12.4 million coins.

Staking is the process of vigorously participating in transaction validation (similar to mining) on a PoS blockchain.

Rather than competing against each other for a block, PoS uses a method in which one node is selected randomly to validate the next block.

The terminology is slightly varying here. PoS knows it as miners’ validators; To become a validator at PoS, users need to deposit a specific amount of cryptocurrency as a stake – like a security deposit.

The higher the amount at stake, the more chances users have to mint a new block. For instance, if a user deposits $100 into the network as a stake, and another user deposits $500, the second user now has a five times higher chance of being chosen to forge the next block.

Lastly, staked coins enable valid transactions, secure the blockchain network, and reward crypto validators for putting their crypto as a stake, reducing the gas fee on the blockchain network.

The practice is widespread among users of leading exchanges like Coinbase, Kraken, and Binance, which collectively have roughly 2.5 million in Ethereum staked on their platform.

Author: Abhishek Kumar

A self-believer who loves to learn and spread the light of wisdom in his community. You could find him writing about finance, cryptos, and marketing. Moreover, he loves to read non-fiction and drink non-alcoholic drinks.

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