The cost of sending transactions on the Ethereum blockchain has dropped to a five-year low, with median gas prices hitting 1.9 gwei over the weekend. This significant decrease in transaction fees coincides with increasing activity on Ethereum's layer-2 networks.
According to data from Dune Analytics, the median gas fee on Ethereum fell to 1.9 gwei on August 10, marking the lowest level since mid-2019. This represents a nearly 98% drop from the year-to-date high of 83.1 gwei recorded in March. On August 12, Etherscan reported that low-priority Ethereum transactions—those that take about 10 minutes to process—were priced at just 1 gwei, or approximately seven cents.
This dramatic reduction in gas fees is partly attributed to Ethereum's Dencun upgrade in March, which implemented nine Ethereum Improvement Proposals (EIPs). Among these, the introduction of data blobs, or proto-danksharding, aimed to lower transaction costs for layer-2 blockchains by enabling them to handle more transactions at a reduced cost while still relying on Ethereum's layer-1 (L1) for transaction verification.
Ethereum's scaling strategy heavily relies on layer-2 solutions, which abstract transactions away from the main Ethereum blockchain to increase efficiency and reduce costs. Data from L2Beat shows that layer-2 networks have significantly outpaced the base Ethereum blockchain in terms of transaction volume. For example, the Base layer-2 network processed over 109 million transactions in the past 30 days, compared to Ethereum's 33 million. Additionally, layer-2 networks Arbitrum and Taiko saw a combined 97 million transactions over the same period.
Despite the benefits of lower transaction fees, some industry experts express concerns about the impact on Ethereum's ecosystem. Gnosis co-founder Martin Köppelmann noted on August 10 that the current low gas fees might not be sufficient to fund staking rewards—payouts given to those who help validate blockchain transactions. He suggested that increasing the gas limit could be part of a strategy to encourage more layer-1 activity, despite the seemingly counterintuitive nature of the suggestion in such a low-fee environment.
As fewer Ether (ETH) is being used for transactions and staking payouts, the supply of ETH has been rising. Data from Ultra Sound Money indicates that nearly 13,400 ETH, worth approximately $34.1 million, was added to the supply in the past seven days.
The ongoing shift towards layer-2 networks highlights the evolving nature of Ethereum's ecosystem, as developers and users seek to balance cost efficiency with network security and decentralization.
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