Record Low Transaction Fees on Ethereum as Activity Shifts to Layer-2 Networks
The average transaction fee on Ethereum has hit record lows as more activity shifts to Layer-2 (L2) networks on the chain. According to Ultrasound.money data, the average gas fee has dropped to 4.81 Gwei, the lowest level since the network completed the Merge event in 2022.
Market observers attribute this decline to the increasing activity on L2 networks following the Dencun upgrade, which significantly reduced fees for L2 networks, making transactions on the base layer less appealing.
IntoTheBlock reported that an increasing number of transactions are now settled on Ethereum Layer 2s, with the three largest L2s accounting for a record 82% transaction share of all Ethereum transactions last month.
Additionally, the number of transactions on Arbitrum has seen significant growth, surpassing 2 million daily transactions on May 8, up from an early March average of 1 million. L2beats data shows that Base and Arbitrum averaged 30 and 20 transactions per second, respectively, while Ethereum managed 13 transactions per second during the same period.
In other news, CryptoQuant analysis revealed that ETH has transitioned to an inflationary state post the Dencun upgrade, resulting in diminished gas fees and reducing its burn rate. The firm noted that the post-Dencun upgrade challenges the ‘ultra-sound’ money narrative of Ethereum by reducing transaction fees and the ETH burn rate, leading to an increase in supply.
CryptoQuant further explained that maintaining deflation in the Dencun upgrade environment would require a significant increase in network activity, contrasting the current trend of low gas fees and reduced burn rates. Notably, UltraSound.Money data shows that the daily amount of ETH burned during the past day was 519 ETH, a record low for the network.
