A sudden outbreak! Ethereum Gas fee surges / dives

The reasons for the sharp surge in Ethereum Gas fees include: 1. Network congestion, 2. Increased complex transactions, 3. Block Gas Limit restrictions; the reasons for the sharp dive of Gas fees include: 1. Reduced network activity, 2. The widespread application of Layer 2 solutions, 3. Technology upgrade and optimization.

The following are the reasons for the sharp surge and diving of Ethereum Gas fees:

Reasons for the sharp surge in Gas fees

• Network congestion 2: When Ethereum network activity surges, such as the peak usage of popular DeFi applications (decentralized financial applications), large-scale NFT (non-fungible tokens) transactions, or the deployment of large smart contracts, the number of transactions will increase significantly. Since the Gas cap for each block of Ethereum is fixed, the number of transactions that can be accommodated is limited, and a large number of transactions are waiting to be packaged will lead to network congestion. At this time, miners will prefer high-priced Gas transactions for packaging to obtain higher returns, which prompts Gas prices to rise and Gas fees soar.
• More complex transactions 2: The execution of smart contracts is usually much more complex than simple Ether transfer transactions. For example, DeFi lending, decentralized exchanges (DEX) transactions and other operations require more computing resources and storage space, and consumes a lot of gas. If the proportion of complex transactions increases over a period of time, the overall Gas consumption will increase, and the Gas fee will also increase significantly with limited network processing capabilities.
• Block Gas Limit Limit: If the block Gas Limit is set lower and the transaction demand continues to increase, it will lead to more transaction competition for limited block space, the Gas price will rise due to competition, and the Gas fee will soar accordingly. Even if the block Gas Limit is adjusted, if the adjustment range cannot keep up with the growth rate of transaction demand, there will still be an increase in Gas fees.

The reason why Gas Fee Dies

• Network activity decreases 1: When transaction activity on the Ethereum network decreases and market activity decreases, the demand for block space will also decrease accordingly. At this time, the competition between transactions becomes smaller. In order to package enough transactions, miners will accept transactions with lower Gas prices. The Gas prices drop, and the Gas fees will plummet. For example, when the cryptocurrency market is in a downturn overall, investors and developers’ activity decreases, the Gas fees for the Ethereum network tend to decrease.
• The wide application of Layer 2 solutions 3: The rise and development of Layer 2 solutions (such as Rollups, sidechains, etc.) has enabled a large number of transactions to be processed off-chain and then submitted to the Ethereum mainchain. This reduces the transaction burden on the Ethereum main network, reduces the congestion on the main network, and thus reduces the Gas fee. Because many transactions originally made on the main network are now transferred to the Layer 2 network, the transaction demand on the main network has decreased, and the price and Gas fees are also reduced.
• Technology Upgrade Optimization 5: Some upgrades and improvements of Ethereum, such as the Dencun upgrade, introduced "blobs", optimized data storage and processing methods, reduced the amount of Gas required for transactions, and may also lead to a decrease in Gas fees. In addition, if the upgrade improves the overall performance and processing power of the network, so that each block can accommodate more transactions, it will also alleviate network congestion and thus reduce gas fees.

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