Ethereum (ETH) Gas Fees Plummet To Historic Lows: Can The Network Broaden Its Appeal?

Ethereum (ETH) has recorded its lowest average gas fees since November 2016.

According to Dune Analytics data, on June 30, the average gas fee dropped to just 3 Gwei, equivalent to $0.14. Notably, nine of the 10 cheapest hours for gas fees occurred last week.

Ethereum just had its lowest hour of average gas prices since November 2016. 9 of the 10 cheapest hours have been this week pic.twitter.com/sd0j9r2Dt1

— Conor (@jconorgrogan) June 30, 2024

Gas fees are essential to the Ethereum network. They cover the costs of various operations and ensure the network’s security by incentivizing validators. These fees also act as a deterrent against spam attacks.

Analysts have attributed the significant drop in fees to improved efficiency in the layer-1 (L1) market. The efficiency is driven by a combination of increased layer-2 (L2) volume and the introduction of “blob transactions” through EIP-4844, which has enhanced Ethereum’s scalability.

Historical Context

A year ago, median gas prices ranged between 15 to 20 Gwei, a stark contrast to today’s much lower figures. In March 2024, peak gas prices reached 83 Gwei, as recorded on March 5 by Dune Analytics. 

However, median gas prices have steadily declined following the Dencun upgrade on March 13. For instance, Ethereum’s median gas price hit a three-year low in April, dropping to 6.43 Gwei on April 27, the seventh-lowest single-day median gas price recorded in the past three years. 

Additionally, on June 23, it went even lower, falling below 3 Gwei, a level not seen since 2020. This triggered a run of some of the lowest hours for gas fees on Ethereum in the last seven years.

Industry watchers believe that the increasingly low gas prices are an indication that Ethereum’s L2 networks are effectively reducing transaction costs on the world’s second-most valuable blockchain.

Why Lower Gas Fees Matter

The drop in Ethereum’s gas fees is significant for several reasons. Lower fees make the network more accessible to a broader audience, encouraging more users and developers to engage with the platform. 

It can lead to increased adoption of Ethereum-based applications and services, further solidifying the network’s position in the blockchain ecosystem.

Moreover, affordable gas fees help maintain the network’s security and functionality without pricing out smaller participants. 

This democratization of access is important for fostering innovation and ensuring that the benefits of blockchain technology are widely distributed.

Finally, lower gas fees can stimulate activity in sectors like decentralized finance and NFTs, which high transaction costs have previously hindered.