Ethereum’s dominance (defined by market capital) has fallen by 2.24% from the current year-to-date high of 20.48%. Chalking this up to the rise of alternative altcoin ecosystems, analysts have defended Ethereum, backing it to regain its dominance once the network completes the shift to a PoS protocol.
Meanwhile, Ethereum’s average and median transaction fees have continued plunging amid the generally bearish Ether market. Data shows the transaction fees are now in range of figures last recorded in August.
Transaction fees on Ethereum drop to multi-month low
Ethereum average transaction fees have been predominantly decreasing since the second week of January and this week hit the lowest figure since August 2021. Data from BitInfoCharts shows that the average gas fees on the pioneer smart contract blockchain have dipped below $10 twice since last Friday.
Ethereum Average Transaction Fee chart (USD). Source: BitInfoCharts
The transaction fee sunk to $9.219 on Saturday before rising at the start of the new week and then dropping to $9.579 yesterday.
The median-sized gas fees chart has, as expected, traced a similar path, with median cost recently dropping to figures last recorded at the start of last August.
Ethereum Median Transaction Fee chart. Source: BitInfoCharts
The median transaction fees fell to $3.861 on Saturday before seeing further declines into the new week.
The average fee charged to complete transactions on Ethereum on March 08 (at the time of writing) is 0.004 ETH ($10.32), while the median figure is 0.0014 ETH ($3.67). For context, the equivalent figures at the start of the year were $25.797 and $13.429, respectively.
L2 options boast better fees
The slump in Ethereum transaction fees since the turn of the year could likely be an effect of a decline in on-chain transaction activity. Another theory that has been floated is the growing adoption of Layer 2 protocols like Arbitrum and Optimism.
JPMorgan and The Bank of America have previously highlighted transaction fees as one of the factors that could make Ethereum lose its market share. Notably, the issue of high gas fees on Ethereum has seen many people move away from the network to cheaper alternative ecosystems like Solana.
Though the current Ether transaction fees have dropped significantly, they are still not close to the fees charged on L2 protocols. The majority of L2 protocols have gas fees (to send Ether) below $1, as illustrated by data from l2fees.
L2 Fees Chart In Comparison. Source: l2fees
Loopring has the lowest transaction fee, costing only $0.12 per transfer at the time of writing. The equivalent cost of swapping tokens is $0.64. zkSync and Polygon Hermez follow closely with $0.19 and $0.25. The fee for swapping tokens on the former is $0.45.
Ether market capital dominance on a three-month decline
The dominance of Ether, the second-largest cryptocurrency by circulating value, has been gradually declining since December, market data shows. TradingView’s ETH market capital dominance chart indicates that the share of Ether in the crypto market has shrunk by approximately 4% during this period.
Ethereum Market Dominance chart. Source: TradingView
Ether’s dominance last year peaked on December 08 at over 22.26%. This figure had fallen to 20.05% on January 01 before sinking further to a year-to-date low of 17.40%. This figure has remained between 18.10% and 18.40% over the last three days.
The decreasing figures suggest Ethereum could be the victim of what it once did. Following its release in 2015, Ethereum’s popularity and adoption began to increase. Its growth saw it eat into the overwhelming market share of Bitcoin, which was still the leading cryptocurrency only with a much bigger share than it has now. Now, the new and rapidly-growing rival alternative ecosystems are similarly threatening Ethereum’s dominance.
Upcoming developments could help Ethereum reclaim its dominance
Though the falling dominance raises huge concerns, some experts are confident that Ethereum will soon regain its ground. GlobalBlock’s Marcus Sotiriou, last week, theorized that Ethereum would pick up and repossess the dominance it has shed when the blockchain completes the transition from the proof-of-work to the proof-of-stake mechanism.
“This is because it should dramatically reduce the cost of transactions on the Ethereum network, which is currently Ethereum’s main drawback,” Sotiriou told Business Insider.
The switch, which has been dubbed is ‘The Merge,’ is only a few months away as Ethereum core developers recently stated with much certainty that bar any changes, it will take place in the second quarter of the year.
To learn more about Ethereum, visit our Investing in Ethereum guide.
The post Ethereum’s Market Dominance and Transactions Fees Have Been On a Decline In 2022 – Here’s What to Make of It appeared first on Securities.io.
