- Ethereum gas fees hit a historic low at 8.8 Gwei on October 8, 2023, creating significant interest within the cryptocurrency community.
- Reduced engagement in decentralized finance (DeFi) applications, non-fungible tokens (NFTs), layer-2 networks, and Telegram bots played a crucial role in driving down Ethereum’s gas fees.
- The drop in Ethereum gas fees led to a shift from a deflationary to an inflationary state for Ethereum in September, influencing the overall supply of the cryptocurrency.
On October 8, 2023, the cryptocurrency community witnessed a remarkable event as Ethereum’s average gas fees dropped to a low of 8.8 Gwei. This marked a historic moment, as gas fees hadn’t reached such levels since October 2, 2022.
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The decline in Ethereum’s gas fees generated intense interest and debate throughout the blockchain ecosystem. Gas fees on the Ethereum network are measured in Gwei, which is a unit equivalent to 10^9 Wei – the smallest denomination of Ethereum (ETH).
Several factors contributed to the unprecedented drop in Ethereum’s gas fees. For instance, major players on the Ethereum network, such as Uniswap, 1inch, and MetaMask, added to the reduced gas fees. These Ethereum networks had a double-digit decrease in their gas consumption within a single week.
This shows a changing landscape in Ethereum as these entities adjusted their strategies in response to market conditions. Top gas spenders, including exchanges like Binance and Coinbase, as well as layer-2 networks, spent 30% less compared to the previous week.
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This marked a notable change, especially for low-fee layer-2 networks, which had seen consistent growth over the past year. These changes demonstrate the adaptability of the Ethereum ecosystem in response to evolving market dynamics.
Another key contributor was the decreased engagement in decentralized finance (DeFi) applications, non-fungible tokens (NFTs), layer-2 networks, and even Telegram bots. NFTs experienced a substantial dip in their weekly trading volumes.
NFT trading volumes dropped to levels not seen in two years. This shift is indicative of evolving trends and priorities within the cryptocurrency space. Telegram bots, which enjoyed a surge in popularity in the second quarter of the year, also witnessed a decline in activity as October began.
Ethereum Turns Inflationary Due to Reduced Gas Fees
The decrease in Ethereum gas fees had a big impact beyond just the cost of transactions. In September, Ethereum went from being in a deflationary state to an inflationary one, and this was mainly due to the lower gas fees.
Additionally, ETH experienced its lowest rate of “burn,” where only 7,084 ETH was used up, which was quite different from earlier times.
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Because of these changes, the supply of Ethereum started increasing at a daily rate of about 1,450 ETH, which is roughly equivalent to $2.2 million worth of Ethereum.
This shift in how Ethereum’s supply works resulted in an annual inflation rate of 0.44%. This gives some insight into what it means for Ethereum to move towards an inflationary model and how sustainable it might be in the long run.