If current trends continue, ETH’s supply will tag a new 2024 high in the next six days.
Ethereum gas fees have slumped to their lowest level in more than four years as competition for block space remains low following the network’s Dencun upgrade in March.
According to BitInfoCharts, the average Ethereum gas fee crashed to just $1.34 on June 22, its lowest level since April 18, 2020. When measured in gwei, Ethereum gas prices dropped to more than a five-year low of 1.9 gwei on the same day, according to Dune Analytics.
The recent spate of low fees has resulted in Ethereum’s supply flipping inflationary since early April as base transaction fees — which are burned by the network — dry up.
More than 44,500 ETH were added to Ether’s supply over the 30 days, equating to annual growth at a rate of 0.45%, according to Ultra Sound Money. Nearly 109,500 ETH have entered circulation since tagging a post-merge low of 120,063,473 on April 5.
With roughly 120,173,000 ETH currently in circulation and close to 13,000 coins entering supply on a weekly basis, ETH’s supply is on track to post a new year-to-date high in six days’ time if the current trend continues.
Curiously, the decline in gas fees has not coincided with a heavy drop in overall transaction volumes.
Data from Etherscan shows daily transactions dipping from a local high of 1.37 million on March 20 and largely trending between 1.1 million and 1.3 million since — roughly the same range posted while 85,000 ETH was burned in November and December.
Further, June 22 hosted the largest daily transaction count since April 12 with more than 1.31 million despite gas fees slumping to a multi-year low on the same day.
Dencun drops L2 fees
The decline in gas fees appears to coincide with the activation of Ethereum’s Dencun upgrade on March 13.
Dencun dramatically improved the efficiency of both transacting on Layer 2 and posting L2 transactions to the Ethereum mainnet by replacing gas-intensive calldata with binary large objects (blobs).
Average gas fees posted a local high of $30.33 on March 5, before crashing to less than $2 by mid-May. While fees briefly rebounded in late May and posted a local high of $8.86 on June 6, gas prices have steadily slumped since.
According to data from GrowThePie, top Layer 2 networks Aribtrum, OP Mainnet, ZkSync Era, and Base paid between $262,000 and $601,000 in daily fees to Layer 1 during peak activity on March 5, up from between $100,000 and $216,000 throughout mid-February.
By comparison, leading L2s were paying between just a few hundred dollars and $7,500 during May, suggesting the sharp decline in the costs associated with posting Layer 2 transactions to mainnet is a significant factor contributing to Ethereum’s recent decline in gas fees and burn rate.
