Ethereum supply turns inflationary as gas fees drop to record lows
The Ethereum ecosystem is experiencing a historic drop in gas fees, which is impacting both mainnet and Layer 2 transactions.
According to Etherscan Gas Tracker, the average gas fee on the mainnet stands at 4 Gwei at press time, approximately $0.21. However, transactions can be processed for as low as 3 Gwei, or around $0.14.
This decline extends to the blockchain networks Layer 2 solutions including Optimism, Base, Arbitrum, and Linea whose fees are below $0.01 per Gasfees.io data.
Market observers said the fee decline is mainly due to the increased use of Layer 2 scaling solutions and the adoption of blob transactions introduced with the Dencun hard fork in Marchthe upgrade has contributed to lower transaction costs on Layer 2 networks and has significantly impacted the network.
Effect of ETH gas fees drop
As a result of the lower fees, less ETH is being burned, making the network inflationary.
In the past 24 hours, less than 200 ETH were burned, leading to Ethereums supply becoming inflationary with a growth rate of 0.67%, according to data from ultrasound.money. Over 60,000 ETH was added to the network in the last 30 days.
OKX Ventures noted that this continues a trend observed in the second quarter when a 66.7% drop in the burn rate affected ETHs supply-demand balance. The firm added:
As network activity slows and burns decrease, managing Ethereums supply and inflation will be crucial.
Ethereum ETFs
Meanwhile, analysts have pointed out that the recent launch of Ethereum exchange-traded funds (ETFs) adds further complexity to the Ethereum ecosystem.
Last week, the SEC approved eight new spot Ethereum ETFs, including the conversion of Grayscales ETHE fund, for trading on US exchanges.
These products saw inflows exceeding $1 billion during their first four days of trading, although this was offset by a roughly $1.5 billion outflow from Grayscales ETHE.
However, crypto analyst Koffi believes these trends show the network is in a good place. He wrote:
The Ethereum ecosystem is affordable for end users + Theres new capital flowing into the system. I think were in a good place.
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