Aims:

• Transaction fees on Polygon since July 1, 2022
• Comparison with Ethereum over the same time period
• Correlation between Fess on Polygon and Ethereum

1. Introduction

Polygon is an abstracted transaction layer that sits on top of the Ethereum ecosystem. Polygon sets out to tackle Ethereum's shortcomings like improving transaction processing speed and in turn reducing fees. All in all, this frees up connections and makes the whole ecosystem run faster.

The most important shortcoming of the Ethereum is its high transaction fee which makes it useless for small volume of transactions in practice.

2. What is Gas Fee?

Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the blockchain. "Gas limit" refers to the maximum amount of gas (or energy) that you're willing to spend on a particular transaction. A higher gas limit means that you must do more work to execute a transaction using a smart contract.

3. Statement of Problem

In this bounty it is aimed to conduct a comprehensive study on transaction fees on Polygon and Ethereum to provide a deep understanding of underlying process of this issue. Several parameters are included in this work to get the most in-depth view of the problem. All required information for employed parameters were evaluated from following Flipside tables:

1. ethereum.core.fact_hourly_token_prices: To extract the price of MATIC and ETH in US dollar.

2. polygon.core.fact_transactions: To extract the data for transactions on Polygon.

3. ethereum.core.fact_transactions: To extract the data for transactions on Ethereum.

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The parameters and the intention for use in this study are described below:

1. MATIC and ETH price in US dollar: to provide the volume of transactions, transactions fees and gas prices in US dollar.
2. ETH price fluctuation: to investigate the effects of crypto market volatility on transaction fees.
3. Gas price: to compare the gas price on Polygon and Ethereum.
4. Gas Rate: the division of Gas Used by Gas Limit, to compare whether Polygon or Ethereum needs more gas to complete a transaction.
5. Number and volume of transactions: to examine the relation with transaction fees and gas prices.

It is worth mentioning that all the data have been extracted since July 1, 2022 on an hourly basis.

4. Results

4.1. Transaction Fee and Gas Price on Polygon and Ethereum

Figure 1 shows the transactions fees paid by users on Polygon and Ethereum over time in US dollar. The left vertical axis is fees on Ethereum and the right one shows the fees on Polygon.

First, there is a huge difference between fees on Ethereum and Polygon. For example, at July 1, 2022 06:00, users have paid nearly 77000 USD as transaction fees on Ethereum. Where, users on Polygon have paid only 655 USD as transaction fees. Second, the increase and decrease trends in transaction fees are not well correlated and an increase in one, does not necessarily lead to increase in other.

The paid transaction fees on Polygon were divided by transaction fees on Ethereum (as transaction fee ratio) and depicted in figure 2 in percent. This figure gives better insight into transaction fees payments on both networks. Almost on entire interval, Polygon users have paid transaction fees less than 2.5% paid amount by Ethereum users. Also, since the transaction fee ratio are varying almost randomly over time, confirms the claim that transaction fees of Polygon and Ethereum are not well correlated.

In figure 3 the comparison of gas price in Polygon and Ethereum are provided. As expected, the price of gas in Ethereum is significantly higher than Polygon. Also in this case, no strong relation can be found between gas price on Polygon and Ethereum.

Gas price ratio was calculated same as transaction fee ratio and demonstrated in figure 4. The results revealed that gas price on Polygon is less than 0.2% of Ethereum gas price in average. That is, gas price in Polygon is much cheaper than Ethereum.

4.2. Gas Rate on Polygon and Ethereum

Gas limit and gas used have been extracted for transactions of both Polygon and Ethereum. Then, gas rate was calculated by dividing the gas used by gas limit. Gas rate shows how many percent of gas limit is required to complete a transaction. The comparison of gas rate between Polygon and Ethereum will give a better understanding of differences between these two.

Figure 5 compares gas rate on Polygon and Ethereum over time. It is found that gas rate on Polygon lies between 35% to 55%. On the other hand, on Ethereum, the gas rate is between 60% to 78%. This result implies that not only gas price on Ethereum is much higher than Polygon (as shown in previous section), but also Ethereum users require more gas than Polygon users to complete a transaction. All of these factors would lead to significantly higher levels of transaction fees on Ethereum than Polygon.

Same as before, by dividing the gas rate on Polygon by gas rate on Ethereum, the gas rate ratio has been evaluated and plotted in figure 6. It is revealed gas rate ratio is 60% in average which confirms lower amount of gas required by Polygon users in comparison to Ethereum users.

4.3. Relation Between Number and Volume of Transactions with Transactions Fees and Gas Prices on Polygon and Ethereum

The number and volume of transactions were extracted to investigate if there is any strong relation between these two parameters and the fee payments by users on Polygon and Ethereum. Also, it is tried to identify if number and volume of transactions affect the gas price or not.

Figure 7 shows number and fees of transactions on Polygon. For the data evaluated since July 1, more than 80K transactions are sent on Polygon at each hour. Results demonstrated that there is no strong relation between number of transactions and transactions fees on Polygon.

The same is done and volume of transactions were plotted against transactions fees on Polygon in figure 8. It is found that when volume of transactions is lower than 3 million US dollars on an hourly basis, a strong relation can be established between volume and fees of transactions on Polygon. That is, as volume increases, the fee also increases.

Number and volume of transactions were shown against transactions fees on Ethereum in figures 9 and 10. Same as Polygon, no strong relation can be established between number of transactions and transactions fees on Ethereum. But, in the case of volume of transactions, a weak correlation exists and by increasing in volume, one may expect higher levels of transaction fees must be paid by Ethereum users.

The relation between number of transactions and gas prices on Polygon is assessed in figure 11. As demonstrated, for the whole range of 80K to 140K of transactions per hour, gas prices are almost evenly distributed in below 100*10^(-9) in US dollar. This means that gas price on Polygon is not a function of number of transactions.

Number of transactions were also employed to investigate the gas price on Ethereum. Like Polygon, no relation found between these two metrics.

Finally in this section, it is tried to find the relation between volume of transactions and gas prices on Polygon and Ethereum. Same as transaction fee, when volume of transactions is less than 3 million US dollars per hour, a strong relation can be established between volume and gas price on Polygon. As volume of transactions increases, the gas price also increases in response (figure 13).

4.4. ETH Price and its Fluctuations Effects on Transactions Fees on Polygon and Ethereum

In this part of the study, ETH price and its hourly fluctuations were taken into consideration as an indicator of crypto market condition (if it is downtrend or uptrend and also market volatility).

As shown in figure 15, transactions fees paid by Polygon users are mainly below 2000 US dollars regardless of ETH price (i.e., no clear relation exists between transactions fees on Polygon and ETH price).

The same applies to transactions fees on Ethereum with respect to ETH price. No clear relation exists between these two metrics and a close visual examination of figure 16 may reveal that an inverse weak relation might be found. That is, for higher levels of ETH price, the transaction fee may slightly reduce.

Since no strong correlation was found between ETH price and transactions fees on Polygon and Ethereum, then it was tried to investigate if transactions fees are a function of crypto market volatility or not. For this reason, the absolute hourly ETH price fluctuation has been calculated in percent and plotted against transactions fees on both Polygon and Ethereum in figures 17 and 18.

First interesting point which can be drawn from figures 17 and 18 is that, most of the data is located for the range of price volatility of less than 1% per hour. This means that when market is highly volatile, users act with more carefully and number of transactions reduce. This is more evident for Ethereum users.

Second point is that also ETH price fluctuation cannot be employed to predict the transaction fee on Polygon and Ethereum. As data on figures 17 and 18 imply, price fluctuation has not a meaning full relation with transaction fee.

Close visual examination of results in figure 14 gives the idea that a weak correlation can be found between volume of transactions and gas prices on Ethereum. For higher volumes of transactions users must expect higher gas price.

The findings in this section shown that gas price in both Polygon and Ethereum requires more investigation to find out how network determines it. If this issue is clarified for users, it will greatly help them to manage their transactions especially for those who sent relatively large number of transactions in small volumes.

5. Conclusion

In this work a comprehensive study was conducted on transaction fees on Polygon and the results were compared with Ethereum. Several parameters were employed to ensure as much as details are included in the study. The following results summarize the findings of this study:

1. Transactions fees on Polygon are significantly lower than Ethereum.

2. Gas price on Polygon is very cheaper than Ethereum.

3. Gas rate (the ratio of gas used to gas limit) on Polygon is almost 60% of gas rate on Ethereum. That is, not only gas price in Ethereum is higher than Polygon, but also required gas to complete a transaction is higher.

4. The transactions fees paid by Polygon users is less than 2.5% of fee payments by Ethereum users.

5. Number of transactions have no relation with transaction fee on Polygon and Ethereum.

6. When volume of transactions is less than 3 million US dollars per hour, strong relation exists between this parameter and transactions fees paid by Polygon users.

7. Volume of transactions on Ethereum has no meaning full relation with transaction fee.

8. Gas price on both Polygon and Ethereum cannot be predicted using number of transactions.

9. On Polygon, when volume of transactions is lower than 3 million US dollars per hour, strong correlation can be found with gas price.

10. Gas price on Ethereum cannot be expressed as a function of volume of transactions on this network.

11. Neither ETH price nor its absolute price fluctuation can be employed to predict the transaction fee on Polygon and Ethereum.

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Finally, it should be mentioned that transaction fee on Polygon is not well correlated with transaction fee on Ethereum. Author believes this result is unexpected. In another work by author (which grand prize was awarded for), it is shown, there is a meaning full relation between ETH price volatility and transaction fee paid by Sushi users [look here: ].

Also, the amount of fee payments by Sushi users was strongly correlated with number and volume of transactions. The reason behind evaluated results in this study might be due to very short interval considered (just few days since the beginning of July). Crypto market is highly volatile and the data for short duration of time cannot well represent its underlying process. Author recommends more bounties be dropped to examine the issue in more details.