Ethereum activity hits ATH as fees drop 99%

ethereum (eth) on-chain activity hit new highs this year as mainnet transaction fees fell by more than 90%.

Token Terminal Data x.com/tokenterminal/status/1830602860352172072″ target=”_blank” rel=””>presented ethereum (eth) revenue has fallen by 99% since March, reaching one of the lowest levels in the blockchain’s history. This revenue is generated by fees for executing transactions on the ethereum main blockchain.

At the same time, eth on-chain swaps have skyrocketed to new all-time highs this year, according to L2Beat analysis. Syncracy Capital co-founder Ryan Watkins described these developments as bullish for the ethereum chain and decentralized finance.

The fact that ethereum on-chain activity is hitting new highs while fees are down 90% is bullish, not bearish.

The faster transaction fees move to zero, the better.

North Star aims to bring billions of people around the world into the crypto economy with eth as the programmable money at the center of it. https://t.co/J0FGmle5VL image.twitter.com/ROPGz0hYkT

— Ryan Watkins (@RyanWatkins_) twitter.com/RyanWatkins_/status/1830746513053561053?ref_src=twsrc%5Etfw” target=”_blank” rel=””>September 2, 2024

Why are ethereum L1 fees going down but activity increasing?

Fees on the ethereum mainnet began to decline after the implementation of the Dencun upgrade in March. Dencun introduced blob and proto-danksharding technology to the ethereum ecosystem, allowing layer-2 networks to process more data and transactions.

The upgrade improved L2 utility while simultaneously decongesting the ethereum main layer. As a result, sending transactions across ethereum and its L2 networks became cheaper, leading to a reduction in revenue on the ethereum mainnet.

However, cheaper fees incentivized users to take advantage of the second-largest blockchain after bitcoin (btc) more than ever. Before Dencun, high gas fees were a common problem for regular eth users, and increased activity such as airdrops or token claims often rendered the chain nearly unusable.

The decline in revenue and the rise in on-chain transactions also coincided with Ether gaining the attention of Wall Street.

After bitcoin spot exchange-traded funds (ETFs) debuted in January, the U.S. Securities and Exchange Commission approved similar eth-backed funds in July. By the end of August, investors had traded more than $2 billion worth of Ether spot ETFs.

The long-term impact on eth spot ETFs remains to be seen, and debates continue over whether the development was in line with the spirit of ethereum.