2023-09-25 12:33:30
Ethereum’s average transaction fee has reached its lowest level of the year so far, which is in line with reduced on-chain activity. It is noteworthy that this decrease, however, occurs when the supply of Ethereum has returned to the inflationary phase. Blockchain analytics firm Santiment has revealed that transaction fees on the Ethereum network have dropped to $1.15, the lowest level since last December. Average Ethereum Transaction Fees Falling The decrease in Ethereum transaction fees can be attributed to the recent decrease in network activity. To put this into context, on September 21st, Binance raised the network’s average transaction fee above $10 while performing a routine asset consolidation across wallets. If these technical transactions in the earlier part of the year, e.g. had they occurred at the peak of memecoin craze or NFT trading volume, their impact on network fees might have been less significant. But now Binance’s actions significantly affected gas fees because no other significant network activity coincided with the event. At this level, it clearly shows the decrease in Ethereum network activity in response to current market conditions. Market analysts interpret the decrease in network activity from Ethereum’s number point as a potential positive. Santiment noted that falling Ethereum fees often align with increased network utilization. According to the company, this can potentially boost the price of ETH and contribute to the recovery of the market capitalization. ETH Network Turns Inflationary Again Although Ethereum network fees have fallen to a yearly low, the digital asset has turned into inflation as fewer tokens are burned. In the past seven days, Ethereum’s supply has increased by 6,371 ETH, according to Ultrasoundmoney. Blockchair Lead Developer Nikita Zhavoronkov explained that ETH was inflated due to network fees. “Ethereum fees, which should burn ether, are everywhere but not on the Ethereum blockchain: in its own L2s (Arbitrum, Polygon, etc.) and in EVM’s competitors (BNB, Avalanche, etc.),” said Zhavoronkov. Ethereum’s transition to a proof-of-stake algorithm last year was aimed at reducing supply with the burning mechanism. However, the decrease in network activity hindered this burning. Similarly, the spread of Layer-2 networks is taking over more and more network activity from the mainnet and at the same time pushing the Ethereum blockchain into the background.
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