Ethereum's network fees have recently dropped to unusually low levels, consistently staying below 1 gWei for several days. Even during the most pessimistic market periods for ETH, transaction costs have never been this low. This trend highlights a significant shift in network activity and raises questions about the underlying causes and implications.
The current low activity on Ethereum is the primary driver behind these minimal gas fees. For standard or slower transactions, costs can drop even further. Although high-speed operations may incur slightly higher fees, the network recently saw averages as low as 0.57 gWei. While this dip is considered atypical, it reflects broader changes in how the ecosystem is being used.
Gas fees are not a constant metric and can fluctuate based on various factors. Even during generally calm market periods, usage can spike due to NFT mints, token launches, or Layer-2 (L2) blob activity. However, the present low fees indicate the success of Ethereum’s recent scalability upgrades and the migration of volume to L2 solutions like Arbitrum, Optimism, and Base.
Compared to Ethereum’s early days, current fees are still higher. Yet, it's notable that even the bear markets of 2022 and 2023 did not see gas costs this low. In recent weeks, Ethereum’s fee levels have returned to those last seen in 2020.
Periods of low fees can sometimes lead to unexpected spikes, where small transactions might temporarily cost up to $200. While low costs are not a barrier to usage, they may signal reduced speculative interest. One reason is that significant trading activity has migrated to networks like Solana and Base.
What Low Gas Fees Mean for Ethereum’s Economy
From a user perspective, lower ETH fees are beneficial. Most transactions now cost under $1, making Ethereum more suitable for DEX swaps, bridging, DeFi operations, and NFT trading. However, when compared to Solana, Ethereum’s costs remain higher.
Low fees also impact ETH’s tokenomics. The burn mechanism, introduced with EIP-1559, has slowed significantly. Currently, the burn rate only neutralizes ETH emissions, resulting in a modest inflation rate of 0.74%. This equates to nearly 17,000 ETH entering circulation weekly, or close to 1 million per year.
The primary reason for reduced burning is the migration of activity to L2 chains. One proposal to improve the burn rate suggests charging more for blob transactions on L2s. Presently, blob fees are not burned but are paid to validators. A new proposal aims to make blob costs rise faster, potentially increasing the burn rate when L2s use mainnet space.
Some L2s actively pay higher blob fees for visibility and marketing. If fees increase, these chains may optimize blob usage, but when necessary, their transactions would contribute more to ETH burning. 👉 Explore more strategies for network efficiency
Ethereum Sees Significant Value Outflow
In recent weeks, Ethereum has experienced substantial value outflow, both in terms of market capitalization and protocol balances. Over the past three months, Ethereum has been a net contributor to Arbitrum and other leading L2s, with a net outflow of $1.4 billion in wrapped ETH, ERC-20 tokens, and stablecoins.
This liquidity is largely locked within L2 ecosystems, with little bridging back to the mainnet. Most economic activity now occurs on L2s, where native DEXs and DeFi protocols operate efficiently. Ethereum’s mainnet currently holds about $45 billion in value, down from recent highs.
Major outflows have been observed in staking and restaking protocols like Lido and EigenLayer. After peaking near $20 billion, EigenLayer’s total value locked (TVL) has fallen to $11.5 billion. These protocols have reached an equilibrium, with minor inflows and outflows balancing each other.
Daily active addresses on the mainnet remain steady at around 450,000, consistent with activity levels over recent weeks. However, ETH’s market price has suffered, dropping to $2,471.25 amid a broader market correction that also saw Bitcoin fall to $57,000. Sentiment for both assets remains weak, with expectations of further declines.
Frequently Asked Questions
Why are Ethereum gas fees so low right now?
Low gas fees result from reduced mainnet activity as users migrate to Layer-2 solutions like Arbitrum and Base. Scalability upgrades have also improved network efficiency, contributing to lower costs.
How do low fees affect ETH’s inflation rate?
With fewer transactions, less ETH is burned through EIP-1559. This has led to a slight inflation rate of 0.74%, as new emissions are not fully offset by burning.
Could gas fees spike again suddenly?
Yes. Even during low-activity periods, events like NFT drops or token launches can cause sudden demand surges, temporarily raising fees significantly.
Is Ethereum losing value to Layer-2 chains?
While value is moving to L2s, this migration helps scale Ethereum. Most liquidity remains within the broader ecosystem, though mainnet activity has decreased.
What is being done to increase ETH burning?
Proposals include charging higher fees for Layer-2 blob transactions, which could increase burn rates when blobs are used extensively.
How does Ethereum’s fee compare to Solana’s?
Ethereum’s fees, though low recently, are still higher than Solana’s. However, Ethereum offers greater security and decentralization, justifying the cost difference for many users.