Ethereum transaction fees hit a new low since the DeFi craze in July, and the DeFi hype is over

Key points:

• Ethereum transaction fees are falling.

• This could mean less activity on the blockchain.

• And, the hype surrounding DeFi this summer is over.

The average fee for Ethereum transactions has reached its lowest price since mid-July, when the decentralized finance (DeFi) craze began this summer. Lower fees could mean less activity on the Ethereum blockchain; fees spiked this summer as miners got weighed down by DeFi games this summer. Does this mean the DeFi hype is over?

According to data from indicator website BitInfoCharts, the average price of Ethereum transactions reached $0.905 last Saturday and climbed to $1.029 on Sunday. This is a sharp drop from the highest price of a single Ethereum transaction in early September, when it reached $14.583.

The fees paid for Ethereum transactions are paid to Ethereum miners, who expend computing power to process transactions. When the demand for miners' computing power is greater than the supply, Ethereum transaction fees increase.

This happens when the network is under pressure from a surge in activity. When a lot of people need to process transactions at the same time, miners will prioritize those with the highest bids.

Therefore, when the network is less busy, or when there are enough miners to process the supply, fees fall. The hash rate on the Ethereum blockchain has increased since July but has remained stable; the fees paid on the Ethereum blockchain are more volatile.

Average fees for Ethereum transactions have fallen to levels not seen since July, a possible sign that this summer’s hype around DeFi has faded. Decentralized finance (DeFi) refers to non-custodial smart contracts, lending protocols and synthetic assets.

Starting in late June, these protocols began offering additional incentives to users who use their platforms, sometimes earning up to 1,000% APY. This flooded the market with money, and fees soared.

But let me be clear: People are still interested in decentralized finance (DeFi), and DeFi seems to be still growing. According to DeFi Pulse, a DeFi protocol metrics site, investors have locked up $11 billion worth of cryptocurrency in DeFi protocols.

But while that number used to increase by $1 billion per week, as the market peaked… that growth has tapered off.