Ethereum is well known for its transaction fees (or gas fees) that have often been high enough to deter many users. Yet, in recent months, we've witnessed a dramatic fall in costs on the Ethereum network. The Ethereum transaction feeshave plummeted to levels not seen in years. This shift is significant—it makes the blockchain far more accessible while raising questions about the reasons behind this decline and its implications for the ecosystem. Why is there such a steep drop, and what does it mean for both users and investors? Let's break it down.
Why Are Ethereum Fees Dropping?
Over the past year, Ethereum’s transaction fees have experienced a historic decline. In just one year, the average gas price fell from around 72 gwei to only 2.7 gwei—a drop of approximately 95%. Practically speaking, a token swap that used to cost around $86 in fees now costs merely $0.39, and the cost to sell an NFT has dropped from a prohibitive $145 to about $0.65. These are extremely low levels for Ethereum—indeed, the lowest recorded since July 2020.
As always, this fee drop is a multifactorial phenomenon. First, major technical improvements have increased network capacity. For instance, Ethereum validators recently raised the gas limit per block from 30 to 36 million, a 20% increase. Allowing more transactions per block reduces the competition among transactions and eases the pressure on fees. Additionally, Ethereum rolled out a significant upgrade called Dencun in March 2024—a combination of improvements from previous proposals. This update introduced several enhancements designed to boost the network's scalability and reduce costs, especially for second-layer solutions like Arbitrum, Optimism, or zkSync. By moving part of the transaction load to these layer 2 platforms, the main Ethereum chain is less congested, which further drives down fees.
Moreover, the current context shows a notable decline in overall on-chain activity. The number of transactions directly on the Ethereum blockchain has fallen to levels unseen since late 2024. Less congestion naturally translates into lower fees per user.
To put this trend in perspective, consider other blockchains. Historically, Bitcoin has a different fee mechanism, where fees are calculated based on the transaction size in bytes rather than the operation’s complexity. Its fees have also fluctuated—during peak congestion, Bitcoin’s average fee even soared to around $60 at the end of 2017. However, overall, Bitcoin’s fees tended to be more moderate than Ethereum’s during the boom of DeFi and NFT activities. Today, notably, Ethereum has become highly competitive. On average, Bitcoin transactions now cost around $0.88 while Ethereum transactions average about $0.37. In other words, sending a transaction on Ethereum is now generally cheaper than on Bitcoin. This reversal is due to Ethereum's technical improvements and the recent decrease in transaction demand. Other competing blockchains, like Solana or Binance Smart Chain, have long offered fees of only a few cents, which had put pressure on Ethereum. The current fee drop helps Ethereum catch up in terms of affordability.
A Relief for Users
The most immediate impact of dropping fees on Ethereum is a significant relief for network users. Transactions that were once costly have become affordable for a broader audience. For instance, making a swap on a DeFi platform like Uniswap or trading an NFT is no longer the preserve of high-net-worth individuals. With fees reduced to just a few cents, using DeFi applications and NFT platforms has regained the accessibility that was lost due to high costs.
Sending ETH or tokens to someone, participating in a crypto fundraising, or interacting with a smart contract now becomes feasible without the burden of steep fees. In practical terms, this could revive activity on decentralized apps that were previously abandoned because of prohibitive costs. Moreover, developers can experiment with new features without worrying that each interaction will cost the user a fortune. Overall, the user experience on Ethereum is significantly enhanced—the network becomes more fluid and engaging day to day, meeting the objective of the recent upgrades.
Opportunities and Risks for Investors
For ETH investors, the implications are more nuanced. Initially, the fee drop came alongside a decrease in overall network demand, which coincided with a downturn in ETH's price. While transactions have become cheaper, the price of Ether has corrected sharply over the past year, falling from about $4,070 in March 2024 to roughly $1,900 today—a nearly 50% drop. In other words, ETH lost nearly half its value even as its network became more economical to use. This paradox is partly explained by the bearish market conditions and the fact that lower fees may signal reduced user activity—fewer active users mean less demand for ETH to pay for transactions.
However, not everything is negative for investors. The fee drop can be seen as a long-term strategic opportunity for Ethereum. By making the platform more attractive and accessible, these improvements could draw new projects, users, and capital to the Ethereum ecosystem. Sectors like DeFi or blockchain gaming might experience a revival on Ethereum now that the transactional "entry fee" is more reasonable. If network activity picks up thanks to lower fees, the demand for ETH (needed to pay gas fees) could rebound, potentially boosting its price. Some analysts even point out that large investors are taking advantage of the current low prices to accumulate ETH, betting on a future network recovery.
That said, there are also risks to consider. If the fee drop is mainly due to a sustained lack of user interest (with users migrating to alternative blockchains, for example), Ethereum could see long-term stagnation. A blockchain that's underused—even if it's cheap to transact on—is not necessarily appealing to investors. Additionally, with lower fees, the token burn mechanism introduced by Ethereum in 2021 (which destroys a portion of the transaction fees to reduce the circulating supply) is burning fewer tokens. This means the deflationary pressure on ETH is less intense than before, which could weigh on its valuation if demand does not pick up correspondingly.
Investors will need to closely monitor network usage indicators in the coming months. A gradual rise in fees coupled with a resurgence in on-chain activity (indicating renewed user interest) could be a positive signal for Ethereum’s future. Conversely, persistently low fees combined with stagnant network usage might suggest a prolonged downturn, warranting caution.
