Ethereum Gas Prices Drop to Five-Year Low Amid Surge in Layer-2 Activity

Ethereum median gas fees have fallen to their lowest in five years, dropping to as low as 1 gwei as Layer-2 network activity surges, sparking concerns about L1 activity and staking rewards.

The Ethereum blockchain is experiencing a significant decrease in transaction costs, with the median gas price plummeting to levels not seen in five years. On August 10, data from Dune Analytics revealed that Ethereum’s median gas fees had dropped to 1.9 gwei, marking a nearly 98% decline from the year-to-date high of 83.1 gwei recorded in March. This sharp decrease in gas prices comes as activity on Layer-2 (L2) networks continues to rise, shifting transaction loads away from Ethereum’s base Layer-1 (L1) network.

Further illustrating this trend, Etherscan data from August 12 shows that low-priority Ethereum transactions, which are typically processed within ten minutes, were priced at just 1 gwei — roughly equivalent to seven cents. This low cost of transactions has been facilitated by Ethereum’s Dencun upgrade, which went live in March and introduced several Ethereum Improvement Proposals (EIPs). Among these was proto-danksharding, a feature designed to reduce transaction costs for Layer-2 blockchains by introducing data blobs.

The Ethereum ecosystem’s focus on Layer-2 solutions is evident in the increasing transaction volumes on these networks. According to L2BEAT data, the Base network processed over 109 million transactions in the last 30 days, significantly outpacing the 33 million transactions on Ethereum’s L1. Other Layer-2 networks, such as Arbitrum and Taiko, combined for an additional 97 million transactions in the same period.

However, the plunge in gas fees has raised concerns within the Ethereum community. Martin Köppelmann, co-founder of Gnosis, voiced his apprehension on X (formerly Twitter) on August 10, stating that Ethereum needs to boost L1 activity to sustain staking rewards. Köppelmann noted that a minimum gas fee of 23.9 gwei is necessary to fund these rewards, suggesting that raising the gas limit could be a strategy to address the issue, even if it seems counterintuitive given the current low rates.

The reduction in transaction fees has also led to a decrease in the use of Ether (ETH) for transactions and staking rewards, contributing to an increase in its supply. Data from ultra sound money indicates that nearly 13,400 ETH, valued at $34.1 million, has been added to the supply in the past seven days.

As the Ethereum network continues to evolve with its Layer-2 scaling solutions, the balance between L1 and L2 activity will be crucial in determining the sustainability of the network’s economic model, including the ability to maintain staking incentives.

Our creator. creates amazing NFT collections! 
Support the editors - Bitcoin_Man (ETH) / Bitcoin_Man (TON)

Pi Network (Guide)is a new digital currency developed by Stanford PhDs with over 55 million participants worldwide. To get your Pi, follow this link https://minepi.com/Tsybko and use my username (Tsybko) as the invite code.

Binance: Use this link to sign up and get $100 free and 10% off your first months Binance Futures fees (Terms and Conditions).

Bitget: Use this link Use the Rewards Center and win up to 5027 USDT!(Review)

Bybit: Use this link (all possible discounts on commissions and bonuses up to $30,030 included) If you register through the application, then at the time of registration simply enter in the reference: WB8XZ4 - (manual)