Fees are paid to the miners who process transactions on a typical PoW blockchain. The size of the fee depends on the size of the transaction in bytes and the way many transactions a coin has skilled within the past [as these got to be checked whenever a coin is moved]. Supply and demand for space also dictate the size of a transaction fee since blockchains have limited capacity.
Both Bitcoin, as well as Ethereum, saw their transaction costs surge to all-time highs in 2021 in April & May, respectively, coinciding with their rising coin valuations as well as price peaks.
Bitcoin’s average transaction fee hit $62.77 USD earlier on 24th April – a figure that exceeded the $55 USD all-time high from December 2017, which stood for over 3-years. By Sunday, fees had fallen as low as $4.38 USD. That marked a 93% reduction and sent Bitcoin’s average fee back to levels not seen since December 2020, prior to 2021’s market pump.
The same general pattern was witnessed on Ethereum, where average transaction fees rose as high as $69.92 USD on 12th May. That was another all-time high for the value of using Ethereum and was undoubtedly fuelled partially by the flurry of activity that accompanied the launch of DeFi and therefore the Uniswap exchange, which has long been the leading users of resources on Ethereum.
Earlier on Sunday, Ethereum’s average fees were as low as $3.44 USD – a figure not seen since the primary day of January 2021 – amounting to a 95% reduction. Fees on both blockchains tend to leap whenever there’s an explosion to the coin’s price or a new application that increases network usage.