According to CoinDesk, Ethereum may be entering a new phase characterized by low network revenue generated from fees, which could test its native token ether's deflationary supply narrative, as reported by crypto data analytics firm IntoTheBlock. The Ethereum blockchain's income from network fees has fallen to its lowest level since April 2020, down 90% from its peak in May, based on IntoTheBlock data. High transaction costs, or gas fees, have been a concern for Ethereum users during the bull market, as the network was prone to congestion due to increased activity from non-fungible token (NFT) trading and decentralized finance (DeFi) yield farming. However, these issues have subsided as cryptocurrency prices have fallen, NFT demand has decreased, and DeFi activity has dropped.

The development of layer 2 solutions, which aim to help Ethereum scale and increase its capacity, has also contributed to the reduction in fees, according to the report. While this is beneficial for Ethereum users who can now execute transactions at a lower cost, it affects ETH's supply by maintaining its inflationary nature, as fewer tokens are burned than newly issued. Lucas Outumuro, IntoTheBlock's head of research, stated that the decrease in fees is testing ETH's 'ultra sound money' thesis. Over the past 30 days, the ETH token supply has increased by 33,500 ETH, valued at approximately $52 million, due to low activity on the blockchain.

Outumuro believes that network fee revenue will likely remain low as speculative activity decreases and users continue to migrate to layer 2 solutions. For instance, NFT trading accounted for the majority of tokens burned in 2021 and early 2022, but only represented 8% last week, as mentioned in the report. Outumuro added that the low fee regime represents a significant transition for Ethereum, trading off high revenues and deflationary supply for the potential to attract mainstream users through layer 2 solutions.