Ethereum Gas Fees: Low Fees, High Demand and Future Prospects

High Demand Market Waves in Ethereum Gas Fees: Are the Critics Wrong?

Whether or not Ethereum gas fees are too high has been a major topic of discussion throughout its history. Rollups have contributed to the exceptionally low fees it has this year, except for the Aug. 4–5 crash, when they were unnecessarily raised.

You would anticipate periodic surges in the behavior of a wholesale market during periods of high demand. However, the future of cryptocurrency is not what many who criticize these developments seem to see.

Resilience to Price Increases: Strategies of L1 and Rollup Suppliers

Maintaining a pricing strategy where supply is always less than demand requires continuous capacity addition to keep costs from rising. On a modular chain, however, this is less significant. The reason why individual users continue to trade on L1 is to have the highest level of security. That would only make sense in the event of significant transactions. A trading company conducting a $5 million swap is unaffected if gas prices drop to 500 gwei.

Wholesale suppliers, like rollups, are the other participants in such an L1. Additionally, these players are not as concerned about sudden increases in base layer prices. When business is regular and fees are minimal, they enjoy a decent profit margin. This gives them a buffer to function poorly during spikes.

Price Wars Begin as Competition in L2s Intensifies: Who Will Gas Prices Affect?

However, L2s will eventually be forced to fight on price due to competition. not only in terms of absolute value but also in terms of volatility. Some even use this promise as an advertisement for themselves. Sequencers will then stash away a portion of their profits from profitable periods to cushion themselves from unfavorable ones.

Additionally, the majority of the gas fees will eventually be deducted from the accounts of end customers, particularly retail consumers. Certain indications, such as USD Coin transactions on Base, already show this.

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