The Ethereum network’s base gas fee currently fluctuates between 1 and 2 gwei. Meanwhile, the daily amount of ETH burned has dropped to its lowest level this year.
According to The Block, with the low gas fees, only 210 ETH was burned on Saturday, setting a record low for this year. In contrast, when gas fees surged to 100 gwei on August 5 due to market volatility, the daily burn also soared to 5,000 ETH.
Due to the extremely low gas fees, the inflation rate of the Ethereum network has increased. According to data from The Block, although 210 ETH was burned on that day, the net ETH issuance exceeded 2,000 ETH.
At the same time, the inflation rate of the Ethereum network in the past week has also risen to 0.586%.
The decrease in gas fees is mainly attributed to a large number of users migrating to Layer 2 scaling solutions and the introduction of blob transactions in the London upgrade in March, which helped lower the costs of Layer 2 networks.
In response to this inflation trend, Martin Köppelmann, the founder of Gnosis, suggested temporarily increasing the gas limit. He pointed out, “The base fee is at a multi-year low, around 0.8 GWEI. It would need to reach 23.9 GWEI to offset staking rewards. In my opinion, Ethereum needs to increase activity on the underlying chain again, and even at such low rates, increasing the gas limit can be a strategy.”
The London hard fork (EIP-1559) implemented in August 2021 introduced the “base fee” that gets burned and the “priority fee” paid to validators. The base fee is directly related to network activity, and an increase in fees leads to more ETH being burned, thus reducing supply.