The Reasons for Low Gas Fees on Ethereum Network, Despite Heightened Activity

Besides increased usage of Binance Smart Chain (BSC) and Solana and accurate gas price infra based on pending transactions, Flashbots is the primary reason for keeping gas fees low as nearly 60% of miners are using it.

The price of Ether is making continuous new all-time highs.

Hitting $2,200 today, the price of ETH started uptrending late last month and gained momentum last week.

As the crypto market enjoys ETH’s 200% YTD performance, another factor to be excited about is the gas fees on the second largest network.

Usually, whenever the value of Eth and altcoins start surging, the fees on the network end up skyrocketing, making it very expensive to use. But this time, the fees have been keeping calm.

In late Feb., the average gas price soared above 370 gwei, a spike somewhat similar to the DeFi summer mania. But ever since then, the gas prices have been trending down, currently around 80 gwei, as per Blockchair. Meanwhile, the average fee is $10, down from ATH of $45 on Feb. 23.

This drop in fees on the Ethereum network is speculated to be in part driven by the growing usage of the Binance Smart Chain (BSC) and Solana. Accurate gas price infra based on pending transactions may have also added to a positive feedback loop for reducing gas prices. SOL -4.90% Solana / USD SOLUSD $ 38.99
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But more importantly, it is the result of Flashbots, which are currently accounting for more than 58% of hashrate.

Flashbots is a research and development organization that was formed to mitigate the negative externalities and existential risks posed by miner-extractable value (MEV). Anonymous developer Stephane shared ,

“We started thinking about flashbots during Defi summer when fees were at 500+ gwei My hope was that if we built it and miners adopted it, flashbots would be able to significantly reduce gas prices paid by regular ethereum users, while increasing miner fees overall.”

MEV is basically about transaction sequencing, who gets to be at the front of the line to have their transaction settle on-chain. In the current environment of fast-paced DeFi, further intensified by bots, being a first is getting increasingly competitive, resulting in higher and higher fees. Miner profit from this gas bidding war while smaller users get priced out of the network due to overpriced transactions being preferred.

According to Flashbot, MEV extracted in the last 30-days has been nearly $45 million, arbitrage accounting for 96% of it, and 47% of it belongs to Uniswap.

Flashbot is a way for users to directly communicate their transaction ordering preferences to miners via “bundles” of transactions but instead of paying fees via gas prices, using Flashbots users pay fees via a smart contract call which transfers ETH to a miner, noted Robert Miller who pointed out how some people are making hundreds of ETH by exploiting the sandwich bots.

With about 60% of miners using Flashbots, pushing gas price auctions off-chains, a lot less gas has been getting wasted. MEV is looking to be a big narrative for 2021.

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