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Ethereum transaction fees have reached a new low, with the median price for sending a transaction falling to 1.9 gwei, marking a significant drop from earlier in the year. This decrease is attributed to increased activity on layer-2 networks and a recent upgrade that introduced improvements aimed at reducing transaction costs.
Median Gas Fees Hit Record Low
The median gas fee for [Ethereum] transactions plummeted to 1.9 gwei, according to data from Dune Analytics. This figure represents the lowest median price for transaction fees since mid-2019 and reflects a nearly 98% decrease from the 83.1 gwei high recorded in March. Low-priority transactions, which have a longer confirmation time, were priced even lower, around 1 gwei or approximately seven cents, as of August 12, based on Etherscan data.
Impact of Ethereum’s Dencun Upgrade
The significant drop in transaction fees follows Ethereum’s Dencun upgrade, which went live in March. This upgrade incorporated nine Ethereum Improvement Proposals (EIPs), including proto-danksharding, a technology designed to lower transaction costs for layer-2 solutions. Proto-danksharding introduces data blobs that improve the efficiency of layer-2 rollups by reducing the amount of data processed on the main Ethereum blockchain.
Layer-2 Networks Outperform Ethereum’s Base Layer
The Ethereum ecosystem's scaling strategy increasingly relies on layer-2 networks, which have been handling a growing volume of transactions more efficiently and cost-effectively than the base Ethereum layer. According to L2Beat, the layer-2 network Base recorded over 109 million transactions in the past 30 days, compared to Ethereum’s 33 million transactions. Additionally, layer-2 networks Arbitrum and Taiko collectively processed an additional 97 million transactions during the same period.
Concerns Over Funding for Staking Rewards
Despite the benefits of lower transaction fees, there are concerns about the sustainability of Ethereum’s economic model. Martin Köppelmann, co-founder of Gnosis, expressed on X that Ethereum needs to see increased activity on its base layer to ensure sufficient funds for staking rewards. Köppelmann highlighted that current gas fees may be inadequate to cover these rewards, which are essential for incentivizing validators who help secure the network.
Read more: Celsius Challenges Tether in $3.5B Bitcoin Collateral Claims
Rising Ether Supply and Its Implications
The decline in transaction fees has also contributed to a rise in Ether’s supply. With fewer ETH being used for transaction fees and staking rewards, the amount of Ether in circulation has increased. Data from Ultra Sound Money reveals that nearly 13,400 ETH, worth approximately $34.1 million, was added to the supply in the past week. This increase in supply could have implications for Ether’s value and overall market dynamics.
Strategic Adjustments Amid Low Fees
The low transaction fees might seem counterintuitive given Ethereum’s recent progress, but they are part of a broader strategy to enhance scalability and efficiency. As layer-2 networks continue to handle the bulk of transaction volume, the base Ethereum layer is expected to evolve with higher limits and other adjustments to balance the network’s needs.
Navigating Ethereum’s Evolving Landscape
The dramatic drop in Ethereum transaction fees and the rise in layer-2 activity highlight a pivotal moment for the Ethereum ecosystem. As the network adapts to these changes, stakeholders will need to consider both the opportunities and challenges presented by lower fees and increased Ether supply. Monitoring these developments will be crucial for understanding Ethereum’s trajectory and its impact on the broader cryptocurrency market.
