The Ethereum gas fee represents the costs associated with transactions and operations on the Ethereum blockchain. Each operation, such as making transactions, executing smart contracts, or transferring tokens, requires computational resources. The gas fee quantifies this resource usage, with users covering it as a “transaction cost.”
Recently, owing to updates implemented in recent months, the current gas price on the Ethereum network has seen a significant decrease, influencing both the main network and second-layer scaling solutions. Consequently, the price of Ethereum gas has reached a historic low.
A notable decrease in gas fees on the Ethereum network
According to data from Y Charts, the average daily gas fee on Ethereum has dropped below 4 Gwei, equivalent to approximately $0.4. Some transactions on the Ethereum mainnet now incur gas fees as low as 3 Gwei, while second-layer scaling solutions like Optimism, Base, Arbitrum, and Polygon can charge less than $0.01 for transactions, based on data from Gasfees.io.
Ethereum average gas fee, source: Y Charts
The decline in fees can be attributed primarily to the adoption of second-layer scaling solutions, which often provide faster and more cost-effective alternatives to the main network. It’s also important to mention the Ethereum Dencun update from March, which played a significant role in reducing transaction costs.
Gas fees are also influenced by network activity. Currently, during the summer months, the cryptocurrency market is less active compared to the spring when Bitcoin reached an all-time high, resulting in lower gas fees overall.
Impact of falling gas prices
Since the introduction of the EIP-1559 update in Ethereum 2021, the gas fee for transactions is divided into two components. The base gas fee is the minimum required for each transaction, which varies according to the current network load and is determined automatically by the system. This gas fee is always burned, meaning it is sent to a wallet outside the Ethereum ecosystem, effectively removing it from circulation. This mechanism helps alleviate inflationary pressures and could have a deflationary impact on the supply of Ether.
Furthermore, in addition to the base gas fee, users have the option to tip miners, or currently validators, to expedite the processing of transactions. This amount is directed to the network operators and is not burned.
A significant decrease in gas fees leads to less Ether being burned, thereby increasing the cryptocurrency’s supply and generating inflation. Over the past month, the network’s supply rose by more than 60,000 Ether, which is relatively substantial compared to the current total of 120 million ETH.
The Ethereum gas fee is the cost of transactions and operations on the Ethereum blockchain. Every operation within the blockchain, such as making transactions, executing smart contracts, or moving tokens, requires computing resources. The gas fee measures this computing resource, and users pay for it as a “transaction cost”.
However, thanks to updates in recent months, the Ethereum network’s gas price has undergone a significant reduction, affecting not only the core network but also the second layer scaling solutions. Thanks to this, the price of Ethereum gas fell to a historic low.
A Significant Reduction in Gas Fees on the Ethereum Network
Based on data from Y Charts, Ethereum’s average daily gas fee has dropped below 4 Gwei, which is currently $0.4. While some transactions on the Ethereum mainnet cost as little as 3 Gwei gas fees, second-layer scaling solutions such as Optimism, Base, Arbitrum, and Polygon can charge less than $0.01, according to Gasfees.io data for conducting transactions.
Ethereum average gas fee, source: Y Charts
The reason for the decrease in fees is largely due to the use of second-layer scaling solutions, as they can surpass the main network in speed and pricing. The Ethereum Dencun update in March also significantly contributed to this decrease in transaction costs.
Of course, gas fees also depend on network activity. Summer tends to see less activity in the cryptocurrency market than spring, when Bitcoin, among other cryptocurrencies, reached an all-time high
Consequences of Falling Gas Prices
Since the EIP-1559 update introduced in Ethereum 2021, the gas fee for Ethereum transactions is divided into two parts. The basic gas fee is the minimum fee that must be paid for each transaction, depending on the current network load. This is automatically set by the system and does not depend on the user. This gas fee is always burned, meaning it is transferred to a wallet not associated with the Ethereum ecosystem, effectively reducing the available supply. This mechanism helps diminish inflationary pressures and can have a potentially deflationary impact on the supply of Ether.
In addition to the basic gas fee, users have the option to tip miners or now validators, allowing for faster processing of transactions. This portion goes directly to network operators and is not burned.
The significant reduction in gas fees results in less Ether being burned, subsequently increasing the cryptocurrency’s supply. Consequently, the network’s supply grew by over 60,000 Ether in the past month, which is a substantial figure compared to the current total of 120 million ETH.
Benefits of Low Gas Fees
- Affordability for Users: Low gas fees make Ethereum transactions more accessible, allowing more users to participate in transactions without being deterred by high costs.
- Increased Usage: As costs decline, the Ethereum network sees an influx of new users engaging in DeFi and NFT activities, fostering innovation and development.
- Enhanced User Experience: Reduced fees lead to faster transactions, improving overall satisfaction for users interacting with smart contracts and applications on the Ethereum blockchain.
Practical Tips for Users
1. Choose Layer 2 Solutions
Opt for second-layer solutions like Optimism, Base, or Arbitrum for your transactions, as they offer lower fees, making them ideal for regular transactions and micro-transactions.
2. Monitor Gas Prices
Utilize tools like Etherscan’s Gas Tracker to determine the best times to perform transactions based on fluctuating gas fees.
3. Participate in Off-Peak Times
When possible, schedule your transactions during off-peak hours (e.g., late evenings or weekends) to benefit from even lower gas prices.
Case Studies: Successful Transactions During Low Gas Periods
| Date | Transaction Type | Gas Fee (Gwei) | Remarks |
|---|---|---|---|
| July 2024 | Standard ETH Transfer | 3 Gwei | Cost-effective transfer during low activity. |
| June 2024 | DeFi Lending | 4 Gwei | Accessed DeFi lending at minimal fees. |
| July 2024 | NFT Purchase | 2 Gwei | Secured digital art at unprecedented low costs. |
First-Hand Experience with Ethereum Gas Fees
As a regular user of the Ethereum network, my experience during the recent drop in gas prices has been overwhelmingly positive. I was able to execute multiple transactions without the worry of exorbitant fees, allowing me to further explore the decentralized finance ecosystem. Using second-layer solutions has not only saved me money, but it has also streamlined my interaction with various smart contracts and decentralized applications (dApps).
The effective use of Layer 2 solutions combined with the knowledge of when to transact has made my experience seamless, and I encourage all Ethereum users to adopt similar strategies for optimizing their transactions.