The world’s second-largest cryptocurrency Ethereum (ETH) ended the last month of May 2023 on a pretty flattish note and is currently trading around $1,850 levels. However, the last month witnessed some important changes in terms of the drop in the transaction gas fee.
Ethereum’s (ETH) gas fee dropped by nearly 70% within just a month’s time. Interestingly, in early May last month, the Ethereum gas fee touched its 2023 high of $14. However, by the end of the month, it dropped all the way to under $5.
Since the Ethereum blockchain has been host to several asset classes for a very long time, each of them has contributed to gas price surges at different points in time.
However, as the demand for the ERC-20 tokens started to decline in the later years, decentralized finance (DeFi) rose to prominence in 2020. The DeFi wave reached its peak in June 2020 to 2021, contributing a 30% gas fee.
Later since mid-2021, non-fungible tokens (NFTs) gained major prominence while the demand was subdued by the end of 2022. Similarly, the USD-pegged stablecoins have experienced a surge in user demand since 2020.
The decrease in gas usage from stablecoin transactions reflects a shift in their change in utility more than a decrease in demand. Stablecoins are now used less as a payment method but more for hedging and as a store of value”.