Since the founding of EthereumThe network’s high transaction fees have been a major concern in the crypto market, which has made users look for an alternative for their daily activities. However, with the recent development regarding the network’s gas fees, Ethereum could be poised for mass adoption as the transaction fees have dropped to levels never seen before.
Ethereum Gas Fees Drop Amid Network Upgrades
The Ethereum networkone of the most popular choices for cryptocurrency transactions in the industry, has experienced a drop in gas prices to record lows, providing relief to users and developers who have long struggled with high transaction fees.
EgyHash, a crypto trader and on-chain analyst quoted the development in one of his recent research studies shared by CryptoQuant, a leading on-chain data provider. According to the expert, ETH’s daily average gas price reached its lowest level yet, around 2.9 Gwei.
He further highlighted that the network’s daily average fee, expressed in US dollars, reached a multi-year low of around $0.85. As a result of the drop, the daily average burn rate reached an all-time low, with around 115 ETH being burned daily.
While the drop in gas fees and burn rate may be significant compared to the same period in the previous two years, EgyHash noted that Ethereum’s daily average transactions have remained stable or seen good growth.
The on-chain analyst attributes this drop solely to the recently introduced Dencun Upgrade, which was launched in March of this year. More specifically, the Dencun Upgrade introduced a new type of transaction called Blobs, which enables the publication of data on Ethereum with a significant reduction in fees, potentially up to 100%, for Layer 2 Networks such as Arbitrum, Base, Optimism, and many more.
This reduction in transaction fees could be particularly positive for Ethereum, as it makes the platform more usable and cost-effective for new applications, including Non-Fungible Tokens (NFTs) and Decentralized Finance (DeFi).
With transaction prices hitting new lows, optimism about the future of ETH and the user experience within the community is expected to grow. This is because the development demonstrates the team’s efforts to provide a more sustainable network, which strengthens its position as a leader in the blockchain sector.
Impact of the decline on investors
While a drop in gas prices can be good for users and developers, EgyHash believes that it cannot benefit investors. This is due to the significant portion of ETH on the transfer of usage to layer 2 solutions and the potential issues this development may bring, such as user fragmentation and liquidity.
He further noted that the price of ETH has been volatile since the launch of the Decun Upgrade, even experiencing a 35% drop after its launch. Spot Ethereum Exchange Traded Funds (ETFs) were approved. Meanwhile, the total supply of ETH has increased by approximately 197,000, worth $500 million.
Main image from Adobe Stock, chart from Tradingview.com