ETH Burn Rates Plunge as Gas Fees Hit Yearly Low

ETH Burn Rates- Ethereum Network Faces Inflationary Pressure as ETH Burn Rates Plummet

ETH Burn Rates– The amount of ETH burned daily on the Ethereum network has plunged to its lowest level this year, with base fees now hovering between 1 and 2 gwei. This drastic reduction in base gas fees is among the lowest seen in recent years, which has significantly impacted ETH issuance.

On Saturday, only 210 ETH were burned, setting a record low for the year due to minimal gas fees. In stark contrast, on August 5, the daily burn rate soared to 5,000 ETH when gas fees peaked at about 100 gwei. With these current low gas fees, the network’s inflation rate has surged. While 210 ETH were burned, net ETH emission was reported at over 2,100 ETH on Saturday, according to data from The Block.

Ethereum’s Daily ETH Burn Drops to Record Low as Gas Fees Hit New Lows

In light of this inflationary trend, Gnosis founder Martin Köppelmann has proposed temporarily increasing the gas limit. He remarked, The base fee is at a multi-year low of ~0.8 gwei. To offset staking rewards, a fee of 23.9 gwei would be necessary. Ethereum needs to boost L1 activity again, and although it seems counterintuitive at these low rates, raising the gas limit could be part of a strategic solution. The London hard fork (EIP-1559), implemented in August 2021, introduced a burned base fee and a priority fee for validators. The base fee’s direct correlation with network activity means higher fees lead to more ETH being burned, thus reducing the overall supply.

The drop in gas fees is attributed to the growing migration of users to Layer 2 scaling solutions and the adoption of blob transactions from the Dencun upgrade in March, which have contributed to lower costs on these Layer 2 networks.