According to the latest tracking data from Glassnode, transaction fees on the Ethereum network have fallen to their lowest level since May 2017, marking one of the cheapest periods to use the network in nearly a decade.
This is XEM a noteworthy development, given that Ethereum has experienced several periods of strong growth, particularly during the DeFi and Non-Fungible Token boom, which caused network fees to climb to tens, even hundreds of USD per transaction.
Why have Ethereum fees dropped so sharply?
Analysts suggest that the drop in network fees stems from a combination of structural factors, rather than simply reflecting weak short-term demand:
- on-chain activity on Layer 1 is declining as the crypto market enters a correction phase and trading sentiment becomes more cautious.
- The user and application landscape continues to shift towards Layer 2 such as Optimism, Arbitrum, Base, etc., where costs are lower and processing speeds are higher.
- Network efficiency has improved significantly following recent upgrades, particularly changes related to pricing mechanisms and data scalability (blob space), which have reduced gas competition pressure on Layer 1.
Long-term impact: Negative or positive?
Although low fees might be perceived as a sign of cooling activity, many experts view this as a positive signal for Ethereum's long-term strategy:
- Low fees help lower the barrier to entry for new users, especially for on-chain financial, gaming, and social applications.
- Ethereum's Vai as the platform's payment and security layer is strengthened, while Layer 2 handles the majority of day-to-day transaction operations.
- Facilitating tokenization, stablecoin settlement, and institutional adoption—areas of growing interest to global financial institutions.
