Can the network broaden its appeal?

ethereum (eth) has recorded its lowest average gas fees since November 2016.

According to Duna Analytics dataOn June 30, the average gas rate fell to just 3 Gwei, equivalent to $0.14. Notably, nine of the 10 cheapest hours in gas rates occurred last week.

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Gas fees are essential for the ethereum network. They cover the costs of various operations and guarantee the security of the network by incentivizing validators. These fees also act as a deterrent against spam attacks.

Analysts have attributed the significant drop in fees to increased efficiency in the layer-1 (L1) market. The efficiency is driven by a combination of increased layer-2 (L2) volume and the introduction of “blob transactions” via EIP-4844, which has improved ethereum’s scalability.

Historic context

A year ago, average gas prices ranged between 15 and 20 Gwei, a stark contrast to today's much lower figures. In March 2024, peak gas prices reached 83 Gwei, as recorded on March 5 by Dune Analytics.

However, average gas prices have been steadily declining since the Dencun upgrade on March 13. For example, ethereum’s average gas price hit a three-year low in April, falling to 6.43 Gwei on April 27, the seventh-lowest single-day average gas price recorded in the past three years.

Additionally, on June 23, it dropped even further, falling below 3 Gwei, a level not seen since 2020. This triggered a streak of some of the lowest hours for gas fees on ethereum in the last seven years.

Industry observers believe that increasingly lower gas prices are an indication that ethereum’s L2 networks are effectively reducing transaction costs on the world’s second-most valuable blockchain.

Why lower gas rates matter

The drop in ethereum gas fees is significant for several reasons. Lower fees make the network more accessible to a broader audience, encouraging more users and developers to interact with the platform.

It may lead to greater adoption of ethereum-based applications and services, further solidifying the network’s position in the blockchain ecosystem.

Additionally, affordable gas fees help maintain network security and functionality without impacting smaller participants.

This democratization of access is important to foster innovation and ensure that the benefits of blockchain technology are widely distributed.

Finally, lowering gas fees may spur activity in sectors such as decentralized finance and nfts, which were previously hampered by high transaction costs.