The Ethereum network’s base gas fee is currently fluctuating between 1 and 2 gwei. Meanwhile, the daily amount of ETH burned has reached its lowest level this year.
According to The Block, with the low gas fees, only 210 ETH was burned on Saturday, setting a new record for the lowest amount burned this year. In contrast, when gas fees surged to 100 gwei on August 5 due to market volatility, the daily burn rate also skyrocketed to 5,000 ETH.
Due to the extremely low gas fees, the inflation rate of the Ethereum network has increased. Data from The Block shows that although 210 ETH was burned 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 the migration of a large number of user activities to Layer 2 scaling solutions and the introduction of blob transactions in the Kusama upgrade in March, which helped reduce the cost of the Layer 2 network.
Regarding this inflation trend, Martin Köppelmann, the founder of Gnosis, suggested temporarily increasing the gas limit. He pointed out, “The base fee is at a low point in years, about 0.8 GWEI. It takes 23.9 GWEI to offset staking rewards. In my opinion, Ethereum needs to increase activity on the base layer 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 is 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, thereby reducing supply.
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