Ethereum (ETH) Gas Fees Drops Amid Network Upgrades

The Ethereum network, one of the most popular choices for cryptocurrency transactions within the industry, has experienced a drop in its gas prices

As the cryptocurrency market continues to expand and gain traction, one of the key developments that have been closely monitored by users and investors alike is the recent drop in Ethereum gas prices. This development marks a significant shift in the network's dynamics and could have far-reaching implications for the platform's future.

In essence, the decline in gas prices has brought about record lows in the daily mean gas price, which now stands at around 2.9 Gwei. This dramatic reduction, of up to 97% from the peak levels observed last year, translates to a daily mean fee of about $0.85. In comparison to the same period over the previous two years, the network's daily mean transactions have either remained stable or shown solid growth.

This development is largely attributed to the recent Dencun Upgrade, which was launched in March this year. The upgrade introduced a new transaction type called Blobs, enabling efficient data publication on Ethereum. This enhancement brings about a substantial fee reduction, possibly as much as 100%, for Layer 2 networks such as Arbitrum, Base, Optimism, and others.

As a result of the lower gas prices, Layer 2 networks are now able to offer highly reduced transaction fees. For instance, Arbitrum users can now perform transactions for as low as 0.01 Gwei, while Optimism users can enjoy fees starting from 0.005 ETH. These drastically reduced fees are expected to further enhance the user experience and drive greater adoption of Layer 2 solutions.

However, despite the positive impact on user experience and the potential for increased adoption of Ethereum and its Layer 2 networks, a crypto trader and on-chain analyst known as EgyHash has highlighted a potential downside to this development.

According to EgyHash's analysis, a substantial portion of ETH usage is being shifted to its Layer 2 solutions. While this may seem beneficial at first glance, it could also lead to fragmentation of users and liquidity, which may not be entirely favorable for investors.

Furthermore, the analysis reveals that the price of ETH has remained volatile, showing a 35% downswing even after the approval of Spot Ethereum Exchange-Traded Funds (ETFs). Additionally, the total supply of ETH has seen an increase of around 197,000, which is valued at approximately $500 million.

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