In recent days, Ethereum users have experienced remarkably low transaction costs, with gas fees dipping into single-digit gwei levels — a rare occurrence not seen since 2020. On August 10, sending ETH cost just 1 gwei, equivalent to roughly $0.007, according to Etherscan. While this made transactions incredibly affordable, experts caution that such favorable conditions are unlikely to persist.
Gas prices quickly rebounded, doubling to 2 gwei the next day and climbing further to 6 gwei within 48 hours. In fact, since Ethereum’s Berlin hard fork in May 2021, there have been fewer than 20 days where average daily gas fees remained below 10 gwei — highlighting how exceptional the recent dip was.
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Why Are Ethereum Gas Fees So Low?
Alice Liu, Research Lead at CoinMarketCap, attributes the drop in fees to reduced network activity and bearish market sentiment.
“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.
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Liu also notes a recurring pattern in gas fee behavior:
- Fees tend to peak during U.S. business hours due to higher demand.
- They drop significantly on weekends or late at night when fewer users interact with the network.
She warns users not to get too comfortable:
“Extremely low gas fees like this wouldn’t last for long.”
Matt Cutler, CEO of Blocknative, echoes this sentiment:
“Ethereum L1 gas fees have historically been highly volatile. So we should not expect 1 Gwei fees to last.”
The Rise of Ethereum Layer 2 Networks
One of the most significant drivers behind declining L1 gas fees is the mass migration to Layer 2 (L2) scaling solutions. These networks process transactions off-chain and settle finality on Ethereum, drastically reducing congestion and costs.
Since the Dencun upgrade in March 2024, activity across L2s has surged. According to L2Beat, Total Value Locked (TVL) across Layer 2 networks has skyrocketed 300% year-over-year, jumping from $12 billion to $36 billion. At its peak in early June, TVL approached $50 billion, signaling strong adoption.
Key Players in the L2 Ecosystem
Several Layer 2 platforms are leading the charge:
- Arbitrum: Leading the pack with $14 billion in TVL and a dominant 40% market share.
- Base (by Coinbase): Launched less than a year ago, Base rapidly climbed to second place in TVL rankings, showcasing massive retail and developer interest.
- Optimism, Blast, and Mantle: Also gaining traction through innovative incentive programs and liquid staking integrations.
This shift means fewer transactions are being processed directly on Ethereum’s mainnet — directly contributing to lower gas prices.
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Is Price Driving Lower Fees More Than L2 Adoption?
While L2 migration plays a crucial role, some analysts argue that ETH’s price performance has an even stronger correlation with gas fees.
Matt Cutler points out:
“With lower Ether to USD prices, we see lower transaction volumes — and therefore reduced gas prices.”
When ETH is cheaper, users engage less with DeFi protocols, NFT marketplaces, and other on-chain activities. This decline in usage naturally reduces competition for block space, keeping gas prices low.
Historically, spikes in ETH price have preceded surges in transaction volume and gas fees. The current flat performance may be suppressing both — suggesting that any meaningful recovery in ETH’s price could quickly reverse the trend of ultra-low fees.
Inflationary Pressure on Ethereum’s Supply
Another consequence of low gas fees is the potential for an inflationary Ethereum supply.
Under EIP-1559, a portion of every transaction fee is permanently burned — helping offset new ETH issuance and creating deflationary pressure during high-usage periods. But when gas fees are low, very little ETH gets burned.
According to ultrasound.money, only 273 ETH were burned today, compared to 2,560 ETH issued through staking rewards. That results in a net inflationary supply increase of over 2,200 ETH in a single day.
While yesterday saw a slight uptick in burns (from 120 to 273), it’s still far below levels seen during bull markets when thousands of ETH were burned daily.
The good news? This imbalance tends to self-correct. As transaction volume rises — whether due to price recovery or increased dApp usage — more ETH gets burned, potentially returning the network to deflationary status.
Frequently Asked Questions (FAQ)
Q: What caused Ethereum gas fees to drop so low?
A: A combination of reduced network activity due to lower ETH prices and increased migration of transactions to Layer 2 networks has led to decreased congestion on Ethereum’s mainnet, resulting in historically low gas fees.
Q: Are low gas fees good for Ethereum?
A: While low fees benefit users by reducing transaction costs, they can indicate weak network demand. Additionally, minimal fee burning may lead to short-term inflation in ETH supply, which some investors view as bearish.
Q: Will gas fees stay this low?
A: Unlikely. Experts agree that single-digit gwei fees are temporary. As market activity increases — especially if ETH price rebounds or institutional adoption grows — gas prices are expected to rise again.
Q: How do Layer 2 networks reduce Ethereum gas fees?
A: Layer 2s handle transactions off-chain and batch them before settling on Ethereum. This reduces mainnet congestion, lowering competition for block space and driving down gas costs for remaining L1 users.
Q: What role does ETH price play in gas fee levels?
A: Lower ETH prices often correlate with reduced on-chain activity. When fewer people trade, stake, or use DeFi apps, demand for block space drops — leading directly to lower gas fees.
Q: Could Ethereum become inflationary?
A: Yes, temporarily. If issuance from staking exceeds ETH burned via transaction fees, the circulating supply grows. However, this typically reverses during periods of high network usage.
Final Outlook: A Temporary Relief
The current environment of ultra-low Ethereum gas fees offers short-term relief for users but reflects broader market stagnation. The dual forces of weak price momentum and booming Layer 2 adoption have combined to ease pressure on the mainnet.
However, as history shows, these conditions are fleeting. With the potential for renewed bullish sentiment — possibly fueled by ETF inflows or macroeconomic shifts — both transaction volume and gas fees could rebound sharply.
For now, users should take advantage of the low-cost window while preparing for inevitable volatility ahead.
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