Ethereum's daily network fees hitting six-year lows is a direct result of the network's technical upgrades, which have successfully made transactions cheaper. However, this success has created a complex situation for Ethereum's long-term economic model.
The key driver of this change was the Dencun upgrade in March 2024. A central part of this upgrade, called "blob" transactions, slashed the cost for Layer 2 networks (like Base and Arbitrum) to post their data back to Ethereum's main chain (Layer 1). With Layer 2s handling transactions more cheaply off-chain, the demand and competition for blockspace on the main Ethereum network decreased, directly causing the fee collapse.
📊 Implications of the Fee Collapse
While users enjoy much cheaper transactions, the low fees have significant consequences for Ethereum's underlying economics.
For Users: A Clear Benefit
· Lower Costs: The average fee to move ETH is now around $0.17**, and complex actions like a token swap cost just over **$0.10. This makes on-chain activity accessible again for more people.
· Layer 2 Boom: The Dencun upgrade has led to an explosion in Layer 2 activity, with chains like Base now processing more than three times the daily transactions of Ethereum's mainnet.
For Ethereum's Economy: New Challenges
· Reduced Revenue: Daily Layer 1 fee revenue has fallen from over $30 million** to around **$500,000. This is a decline of over 99%.
· Supply Inflation: A key feature called EIP-1559, which used to burn a portion of fees and reduce ETH supply, has nearly stopped. With minimal fees being burned, ETH's supply is now growing slightly instead of shrinking, reversing a previous deflationary trend.
· Value Capture Debate: There are concerns that Layer 2 networks are generating significant value (e.g., profits) but returning only a small fraction to the Ethereum mainnet, questioning the long-term economic sustainability.
🔮 What's Next for Ethereum?
The network is actively evolving to address these challenges and scale further. The recent Fusaka upgrade (activated in December 2025) is designed to increase Layer 2 capacity and efficiency, which should make them even cheaper and faster. Looking ahead, the future value of ETH will likely depend on a few key factors:
· Institutional Adoption: Capital inflows from spot ETFs and large corporations can influence price.
· Network Upgrades: Successful execution of planned upgrades like Pectra and future improvements.
· Market Cycles: Historically, periods of very low fees have coincided with price bottoms and set the stage for the next wave of adoption.
To help you understand the situation at a glance, here are the current fee levels and their key drivers:
· Current Avg. Transaction Fee: $0.168
· Avg. Swap Cost: $0.11
· Key Driver: Dencun upgrade (EIP-4844)
· Secondary Driver: Lower speculative market activity
Would you like a more detailed look at how the Fusaka upgrade specifically aims to improve the situation, or are you interested in the different price forecasts for Ethereum in light of these economic changes?
