Anika Begay
Ethereum gas fees for transactions have dropped dramatically amid a wider decline in the price of the cryptocurrency. According to recent data, the basic fee paid by users has dropped to a surprisingly low 0.82 Gwei, a clear indication of reduced activity on the Ethereum network.
Rapidly Dropping Ethereum Base Fees
Data from Ultra Sound Money reveals that Ethereum’s basic gas fee has been on a steady decline throughout the past week, finally hitting a multi-year low of 0.82 Gwei on Saturday, August 11. This significant drop in gas fees can be attributed to a decrease in large transactions on the Ethereum network. On-chain data from IntoTheBlock reports a sharp drop in the number of transactions above $100,000, with numbers dropping from 16,990 transactions on Monday to just 2,620 transactions on Saturday.
The decrease in gas fees has also led to a decrease in ETH burned. This is based on the idea that base fees paid by users are burned and removed from circulation to create deflationary pressure on ETH supply. Data from Ultra Sound Money shows that only 3,698 ETH tokens have been burned in the last seven days, while 18,065 new ETH tokens have been issued in the same period. This imbalance between tokens burned and new tokens issued has led to a net increase in Ethereum’s circulating supply, which contradicts the deflationary expectation result.
Why are gas rates important?
THE gas tariff ratioNetwork activity and overall ETH supply are key factors that traders and users monitor from time to time. Ethereum gas fees are fundamentally tied to the level of activity on the network. As the number of transactions increases, so does the demand placed on validators to process and validate these transactions.
When the network is congested with a high transaction volume While waiting to be added to blocks, users must pay a higher gas fee if they want their transactions to be processed quickly. This way, they can ensure that their transactions are validated and completed in the next block.
Historically, higher gas fees, while unfavorable to users, have been seen as a reflection of increased interest and activity on Ethereum. Such periods of high network demand often correlate with bullish market action. At its peak, users paid an average daily gas price of $196,638 in May 2022.
During periods of low activity, like what is currently being observedreduced demand always leads to lower gas rates. While lower gas rates can be beneficial for users looking to save on transaction costs, they also reflect a period of slow activity on the network. At the time of writing, Ethereum is trading at $2,585 and is down 3.58% in the last 24 hours.
Featured image created with Dall.E, chart from Tradingview.com
