TL;DR

The average gas price on Ethereum has dropped to 1.9 gwei, the lowest level in five years.
Low-priority transactions now cost around 1 gwei, a 98% drop from the yearly high.
Activity on Layer 2 networks outpaces that on the main chain, increasing the supply of ETH.

The recent drop in Ethereum gas fees has surprised the crypto community, hitting an all-time low of 1.9 gwei on Aug. 10, according to data from Dune Analytics.

This decline represents a drastic 98% reduction from the peak of 83.1 gwei recorded in March of this year.

Holy cow 1 gwei gas on ethereum mainnet.

I still remember when we were happily doing transactions at 200+gwei back in 2021 pic.twitter.com/Ogetdmxx15

— DarrenSRS (@DarrenSRS) August 12, 2024

Low-priority transactions, which can take up to 10 minutes to confirm, are now carried out at even lower prices, around 1 gwei, equivalent to about seven cents.

This notable drop in gas fees comes as activity on Ethereum’s Layer 2 networks is booming.

Layer 2 solutions, which allow for higher transaction volumes to be processed at reduced costs by operating on top of the Ethereum mainchain, have seen a significant increase in usage.

Although these layer-2 networks abstract transactions from the base chain, Ethereum is still critical to verifying these operations.

The Dencun upgrade, implemented in March, introduced several Ethereum Improvement Proposals (EIPs) including data blobs, known as proto-danksharding.

This innovation aims to reduce transaction costs for Layer 2 networks, contributing to the observed drop in gas fees.

However, the decline in fees poses challenges, as Martin Köppelmann, co-founder of Gnosis, pointed out.

Köppelmann noted that to fund staking rewards, which are essential for validating transactions, a minimum fee of 23.9 gwei is needed.

The drop in current fees could jeopardize the sustainability of these rewards.

Layer 2 Activity and its Impact on Ethereum

Activity on Layer 2 networks has far outpaced that on the Ethereum mainchain.

Data from L2Beat shows that the Base network has recorded over 109 million transactions in the past 30 days, while Ethereum has handled 33 million in the same period.

Additionally, Artbitrum and Taiko networks, other layer 2 solutions, have added an additional 97 million transactions in the last month.

This increase in Layer 2 activity has led to an increase in ETH supply, with nearly 13,400 ETH added to the total supply in the past week, according to data from Ultra Sound Money.

The combination of lower gas fees and an increase in layer 2 activity could be influencing Ethereum’s economic dynamics, creating a situation where the mainnet experiences historically low fees while layer 2 solutions become increasingly popular.

This phenomenon reflects an evolution in the Ethereum ecosystem, where cost optimization and scalability play a crucial role in the future of the blockchain.

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Filed under: News - @ August 12, 2024 3:45 pm