Ethereum, which has poor network scalability, has always been criticized for its high gas fees, which even reached a peak of $196 in 2022. However, this stereotype may become a thing of the past. In March this year, Ethereum passed the Cancun upgrade (Dencun upgrade), introducing external data structures "blobs", allowing some data to be stored outside the execution layer, improving the scalability of the main network, and greatly reducing network burden and transfers cost.
Feelings about the upgrade in Cancun! Layer2 performance improvement
A similar situation can be observed in the Ethereum Layer2 solution. According to data from the Gas Fee observation website gasfees.io, the current transfer fees of Layer2 networks including Arbitrum, OP Mainnet, Base and Linea are all less than $0.01. Some market observers believe that the increase in transfers on Layer 2 networks after the Cancun upgrade was due to its low transfer fees.
The data platform L2beats pointed out that the number of transactions per second (TPS) of well-known Layer2 such as Arbitrum and Base has now surpassed the Ethereum main network. In the past few days, TPS for Arbitrum, Base, and Ethereum mainnet were 17.28, 39.80, and 12.17 respectively.
Decreasing costs lead to inflation, and the lower limit of Gas Fee needs to be raised
According to Etherscan data, Ethereum Gas Fee has reached a multi-year low. It even fell below 1 Gwei on August 10, and then rebounded back to 2 Gwei (approximately US$0.06). During the same period, some transfers may still be charged. The cost is around 5 Gwei (approximately US$0.22). The impact of the significant drop in fees has also caused the community to worry about Ethereum’s inflation data. Statistics platform Ultra Sound Money shows that compared to the 7,729 Ethereum coins burned and destroyed in the past seven days, the amount of additional pledged issuance is as high as 18,064. It can be seen that this phenomenon has severely damaged the deflationary narrative of Ethereum.
Fidelity Investment analysts said that in the second quarter of this year, Ethereum experienced the highest inflation rate since the Cancun upgrade, and believes that the ensuing quarter will have the opportunity to continue to hit highs. Martin Köppelmann, co-founder of the Ethereum side chain Gnosis, said that in order to ensure that node validators receive sufficient staking rewards, the Gas Fee of the Ethereum main network must be maintained above 23.9 Gwei, and emphasized that user activities in Ethereum need to resume In addition, raising the minimum limit of Gas Fee is also an operational policy, even if it sounds counterintuitive.
On-chain activity remains stable, but not enough for deflation
It is worth noting that Ethereum’s on-chain activity has not declined since the Cancun upgrade. Judging from the daily transactions (Daily Transactions), the daily average is about 1 million to 1.4 million transactions, and over the past entire period remain stable over the years.
Daily Transactions of Ethereum in the past year Artemis Terminal
Another important data is the on-chain transaction volume (DEXs Volume), which reflects how much value is converted in Ethereum every day. Although the volatility of this indicator is relatively large, over the long term, the daily average has fallen within the range of 1 billion to 3 billion U.S. dollars. In the past six months, it even exceeded 3 billion U.S. dollars on 15 days.
Ethereum’s daily on-chain transaction volume (DEXs Volume) over the past year Artemis Terminal
Combining the two data of transfer volume and on-chain transaction volume, we can know that the activity of Ethereum on the chain has not decreased but increased. Therefore, the sudden drop in Gas Fee may indeed be related to the Cancun upgrade. Under this premise, Ethereum It is bound to require the introduction of a doubling of users to have a chance to return Ethereum to a deflationary state.
