Ethereum Gas Fees Plummet to Four-Year Low

On May 11, gas fees on the Ethereum blockchain dropped to 6 Gwei, a level last seen in January 2020.

At these rates, swapping coins costs an average of $6.2, selling an NFT around $10.5, borrowing $5.7, and cross-chain transfers $2.

The reduction in network fees began following the activation of the Dencun hard fork. A key component of the upgrade was EIP-4844, which implemented the Proto-Danksharding option, aimed at scaling by creating a new type of transaction for large binary data arrays (BLOB).

This has significantly reduced fees in the ecosystem’s L2 networks, particularly those based on Rollups technology.

The record low gas fees in Ethereum were noted by GnosisDAO co-founder Martin Köppelmann.

Ethereum base fee is at record lows. The blob fee still has not even entered price discovery (with a very short exception) and thus is at absolutely 0.
Is this the new normal or will we see periods of +100 GWEI again and by what demand will they be driven?

— Martin Köppelmann ?? (@koeppelmann) May 10, 2024

“The BLOB fee has not yet entered price discovery (with very rare exceptions) and is thus at absolute zero. Is this the new normal, or will we see periods of +100 Gwei again? What demand will drive this?” Köppelmann pondered.

The volatility of gas prices highlights the challenges in assessing and forecasting demand for Ethereum. According to Ultra Sound Money, the burn rate in the network slowed after the hard fork, and in early April, the market issuance of the coin began to rise.

In the past 24 hours, 716 ETH were burned, while 2526 ETH were issued, increasing the asset’s supply by 1810 ETH.

The drop in gas fees has had a somewhat negative impact on Ethereum’s price, compounded by stagnation in the broader market. At the time of writing, ETH is trading at $2900, having lost 4.2% over 24 hours.

Earlier, CryptoQuant analysts noted that Dencun has made Ethereum inflationary again, potentially threatening the narrative of ether as “ultra-sound” money.

In late April, experts at Santiment highlighted a drop in transaction fees on the network to a six-month low ($1.12), which signals the potential onset of an altcoin season.