Ethereum Supply Turns Inflationary As Gas Prices Fall to All-Time Lows
The Ethereum ecosystem is experiencing its first-ever gas fee decline, which is impacting both mainnet and layer 2 transactions.
According to Etherscan Gas Tracker, the average gas fee on the mainnet is 4 Gwei, or about $0.21, at the time of writing. However, transactions can be processed for as little as 3 Gwei, or about $0.14.
This reduction extends to layer 2 solutions on blockchain networks, including Optimism, Base, Arbitrum, and Linea, which have fees of less than $0.01 per Gasfees.io data.
Market experts say the fee decline is mainly due to the increased use of Layer 2 scaling solutions and the introduction of blob transactions introduced with the Dencun hard fork in March. This upgrade contributed to lowering transaction costs on Layer 2 networks and had a significant impact on the network.
ETH Gas Fee Reduction Effect
As fees decrease, the amount of ETH burned decreases, causing the network to experience inflation.
In the last 24 hours, less than 200 ETH were burned, causing Ethereum’s supply to inflate at a rate of 0.67%, according to data from ultrasound.money. Over the last 30 days, more than 60,000 ETH have been added to the network.
OKX Ventures noted that this continues the trend observed in Q2, when a 66.7% decline in the rate affected ETH’s supply-demand balance. The firm added:
“As network activity slows and burns decline, managing Ethereum’s supply and inflation will become more important.”
Ethereum ETF
Meanwhile, analysts have pointed out that the recent launch of an Ethereum exchange-traded fund (ETF) has added further complexity to the Ethereum ecosystem.
Last week, the SEC approved eight new spot Ethereum ETFs, including Grayscale’s ETHE fund, which will be traded on U.S. exchanges.
These products saw inflows of over $1 billion in their first four days of trading, but this was offset by outflows of around $1.5 billion from Grayscale’s ETHE.
But crypto analyst Kofi believes the trend shows the network is in a “good position.” He writes:
“The Ethereum ecosystem is cheap for the end user. + New capital is flowing into the system. I think we’re in a good position.”
