Ethereum
Ethereum transaction fees hit record high as Layer 2 networks siphon off activity
The average transaction fees on Ethereum has reached record levels as activity shifts to Layer 2 (L2) networks on the chain.
According to Ultrasound.money datathe average gas price fell to 4.81 Gwei — the lowest level since the network was completed Merge an event in 2022.
Market observers attributed the decline to increased activity on L2 networks following the completion of Dencun upgrade. The Dencun upgrade significantly reduced fees for L2 networks, making transactions on the base layer less attractive.
In particular, the blockchain analytical platform IntoTheBlock reported:
“A growing number of transactions are now being settled on Ethereum Layer 2. Last month, the three largest L2s achieved a record transaction share of 82% of all Ethereum transactions.
Ethereum Layer-2 transaction sharing. (Source: In the block)
Additionally, the number of transactions on Arbitrum has seen strong growth, reaching over 2 million daily transactions on May 8, a significant increase from the average of 1 million in early March.
L2beats data further indicates that Base and Arbitrum completed an average of 30 and 20 transactions per second, respectively, while Ethereum managed 13 transactions per second during the same period.
ETH becomes inflationary
Meanwhile, CryptoQuant analysis revealed that ETH moved to an inflationary state after the Dencun upgrade, which resulted in lower gas fees and a reduction in its burn rate.
In light of this development, the firm noted:
“Since The Merge, Ethereum appears to be on the right track with its “ultra-sound” monetary narrative, showing a slight reduction in the total supply of ETH. However, the post-Dencun upgrade challenges this by reducing transaction fees and the burn rate of ETH, leading to an increase in supply.
CryptoQuant further explained that the Dencun upgrade environment presented a scenario where maintaining deflation would require a substantial increase in network activity, contrasting with the current trend of low gas fees and reduction in consumption rates.
Notably, UltraSound.Money data shows that the daily amount of ETH burned over the past day was 519 ETH, an all-time high for the network.