In recent days, Ethereum gas fees have plummeted to levels not seen since 2020, with users paying as little as 1 gwei—equivalent to just $0.007—to send ETH on August 10. This dramatic drop marks a significant shift in network economics, driven largely by the growing dominance of Ethereum Layer 2 (L2) scaling solutions. However, analysts caution that such low transaction costs are unlikely to persist for long.
While reduced fees offer short-term relief for users, they reflect broader trends in network activity, market sentiment, and structural changes within the Ethereum ecosystem. As Layer 2 adoption accelerates and transaction demand on the mainnet declines, the implications extend beyond user experience to include ETH supply dynamics, tokenomics, and long-term network sustainability.
Why Are Ethereum Gas Fees So Low?
According to data from Etherscan, average gas prices briefly dipped into single-digit gwei territory—a rare occurrence since Ethereum’s Berlin upgrade in 2021. In fact, there have been fewer than 20 days since then when average daily fees stayed below 10 gwei.
Alice Liu, research lead at CoinMarketCap, attributes this phenomenon to reduced network congestion and weaker market conditions.
“This often occurs during periods where Ethereum is suffering from lower-than-market price levels and is generally seen as a reflection of lower network activity and market sentiments,” Liu explained.
Currently trading around **$2,700**, Ethereum remains nearly **45% below its all-time high** of $4,850. Despite the recent approval of spot Ethereum ETFs—a development many expected to catalyze a price surge—the asset has struggled to gain momentum.
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Low gas fees typically correlate with decreased transaction volume, which tends to coincide with bearish or stagnant market phases. Liu notes that fee fluctuations follow predictable behavioral patterns:
“Gas fees can fluctuate, but they tend to be highest during U.S. business hours, and lower fees tend to happen weekends or late nights when demand typically decreases.”
Still, both Liu and other industry experts warn against assuming these ultra-low costs are here to stay.
Matt Cutler, CEO of Blocknative, emphasizes Ethereum’s historically volatile fee structure:
“Ethereum L1 gas fees have historically been highly volatile. So we should not expect 1 Gwei fees to last.”
The Rise of Layer 2 Scaling Networks
One of the most transformative developments behind falling L1 fees is the mass migration of activity to Layer 2 rollups.
Since the Dencun upgrade in March 2024, which introduced proto-danksharding and drastically reduced data availability costs for L2s, usage across scaling networks has surged. Data from L2Beat shows that Total Value Locked (TVL) across Layer 2s has skyrocketed by 300% year-over-year, rising from $12 billion to $36 billion—and peaking near $50 billion in early June.
This shift means fewer transactions are being processed directly on Ethereum’s mainnet, easing congestion and driving down gas prices.
Key Players in the L2 Ecosystem
Several Layer 2 platforms now dominate decentralized application (dApp) activity and user engagement:
- Arbitrum: Leading the market with $14 billion in TVL and a 40% share of the L2 ecosystem.
- Base (by Coinbase): Achieved second place in TVL less than a year after mainnet launch, showcasing rapid adoption.
- Optimism, Blast, and Mantle: Other prominent networks expanding their footprint through incentives, integrations, and novel staking mechanisms.
These platforms offer faster settlements, lower costs, and seamless user experiences—making them increasingly attractive alternatives to L1.
As more developers deploy dApps on L2s and users migrate assets accordingly, Ethereum’s base layer is effectively transforming into a settlement and security layer rather than a primary execution environment.
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Is Price Driving Activity More Than L2 Adoption?
While Layer 2 growth plays a crucial role, some analysts argue that ETH’s price trajectory has an even stronger influence on gas fee dynamics.
Matt Cutler points out a key correlation:
“With lower Ether to USD prices we see lower transaction volumes and therefore reduced gas prices.”
When ETH’s value declines or stagnates, speculative trading, DeFi interactions, NFT mints, and other on-chain activities tend to slow down. This reduction in usage naturally leads to fewer transactions competing for block space—resulting in cheaper gas.
In essence, while L2 offloading helps keep L1 fees low, the underlying driver may still be macroeconomic: weak investor sentiment and limited price catalysts.
Despite the excitement around spot ETH ETF approvals—an event many believed would reignite bullish momentum—the expected inflows have yet to materialize at scale. Without strong upward price pressure, transaction demand remains subdued.
The Inflationary Risk: What Low Fees Mean for ETH Supply
An often-overlooked consequence of persistently low gas fees is its impact on Ethereum’s monetary policy.
Post-Merge, Ethereum adopted a deflationary mechanism where a portion of transaction fees is permanently burned. When fees rise, more ETH is removed from circulation—potentially leading to net deflation. Conversely, when fees fall, less ETH is burned, tipping the balance toward inflation.
Recent data from ultrasound.money reveals a concerning trend: only 273 ETH were burned today, compared to 2,560 newly issued ETH through staking rewards. That results in a net inflationary supply increase of over 2,287 ETH per day.
While one day doesn’t define a trend, sustained low activity could undermine Ethereum’s deflationary narrative—a key selling point for many long-term holders.
However, experts believe this state is temporary. Both Liu and Cutler suggest that as market conditions improve and transaction volume rebounds—whether due to price appreciation or renewed ecosystem innovation—gas fees will rise again, restoring the burn rate and re-establishing supply equilibrium.
Frequently Asked Questions (FAQ)
Why did Ethereum gas fees drop so low?
Gas fees dropped due to reduced network congestion caused by declining transaction volume and increased migration of activity to Layer 2 scaling solutions like Arbitrum and Base.
Are low gas fees good for Ethereum?
In the short term, yes—users benefit from cheaper transactions. But prolonged low fees may reduce ETH burning, leading to an inflationary supply and weakening one of Ethereum’s core economic advantages.
Will gas fees stay this low?
Unlikely. Experts agree that single-digit gwei fees are temporary and typically occur during periods of low market activity. Fees are expected to rise as transaction demand increases.
How do Layer 2 networks affect Ethereum’s mainnet?
Layer 2s process transactions off-chain and submit batched data to Ethereum’s mainnet, reducing congestion and lowering gas costs while maintaining security.
Does ETH price affect gas fees?
Yes. Lower ETH prices often correlate with reduced speculative and on-chain activity, which decreases competition for block space and drives down gas costs.
Could an ETH price rally increase gas fees?
Absolutely. Historically, price rallies trigger higher trading volumes, NFT mints, yield farming, and other activities that increase transaction demand—and consequently, gas fees.
Looking Ahead: A New Era for Ethereum
The current era of ultra-low gas fees underscores a pivotal transformation: Ethereum is evolving into a layered architecture where Layer 1 secures, and Layer 2 scales.
This transition enables greater scalability without sacrificing decentralization or security. However, it also introduces new challenges—such as managing monetary policy under variable burn rates and ensuring continued innovation across the stack.
Ultimately, whether gas fees remain low depends on a confluence of factors: market confidence, institutional adoption (including ETF performance), technological upgrades (like further danksharding iterations), and user behavior shifts toward L2-first ecosystems.
For now, users enjoy cheaper transactions—but should prepare for volatility ahead.
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