TLDR
- Ethereum transaction costs have fallen to 1.9 gwei, the lowest since 2019
- Layer-2 networks like Base are processing significantly more transactions than Ethereum’s main chain
- Daily ETH burn rate has decreased to 210 tokens, a 2024 low
- Some experts express concern about the sustainability of Ethereum staking rewards
- Ethereum’s recent Dencun upgrade aimed to reduce costs for layer-2 networks
Ethereum has seen its transaction fees drop to levels not witnessed in half a decade.
As of August 10, 2024, the median gas price – the cost to process a transaction on the Ethereum network – fell to just 1.9 gwei, marking a 98% decrease from its March peak of 83.1 gwei.
For users willing to wait about 10 minutes for their transactions to be processed, fees have dipped even further, reaching approximately 1 gwei or seven cents in US currency. This dramatic reduction in costs comes as Ethereum’s layer-2 scaling solutions continue to gain traction among users and developers alike.
Data from L2Beat, a platform tracking layer-2 activity, reveals that Coinbase’s Base network processed over 109 million transactions in the past month alone.
This figure dwarfs the 33 million transactions recorded on Ethereum’s main chain during the same period. Other layer-2 networks are also seeing significant adoption, with Arbitrum and Taiko collectively handling 97 million transactions over 30 days.
The surge in layer-2 activity appears to be drawing users away from Ethereum’s main network. Transaction counts on the primary Ethereum blockchain decreased by more than 5% over the past week, while Base experienced a 9% increase in its transaction volume.
This shift has had a noticeable impact on Ethereum’s token burning mechanism. On August 10, only 210 ETH tokens were permanently removed from circulation, the lowest daily burn rate recorded in 2024. This represents a sharp decline from the 5,000 ETH burned on August 5, just five days earlier.
The declining gas fees and reduced main chain activity have sparked discussions within the Ethereum community about the long-term implications for the network. Martin Köppelmann, co-founder of Gnosis, has raised concerns about the sustainability of staking rewards, which incentivize users to help secure the network by validating transactions.
“Ethereum needs to get more L1 activity again,” Köppelmann stated on social media platform X, suggesting that gas fees of at least 23.9 gwei might be necessary to adequately fund staking rewards.
The current state of Ethereum’s network usage comes in the wake of its Dencun upgrade, implemented in March 2024. This update introduced several improvements, including “data blobs,” a feature designed to reduce costs for layer-2 networks when posting transaction data to the main Ethereum chain.
As the Ethereum ecosystem continues to evolve, the balance between main chain activity and layer-2 adoption remains a topic of interest for developers, users, and investors alike. While lower fees benefit users in the short term, the long-term implications for network security and sustainability are yet to be fully understood.
As of August 12, 2024, the price of ETH stood at $2,551.56, having experienced a 4% decline over the previous 24 hours.
