The Ethereum network’s daily ETH burn rate has plummeted to its lowest level this year, with base gas fees currently hovering between 1 and 2 gwei. On Saturday, only 210 ETH were burned, a significant drop from the 5,000 ETH burned on August 5 when gas fees spiked to approximately 100 gwei.
This decline in base gas fees, some of the lowest recorded in recent years, has impacted ETH issuance. Data from The Block indicates that while 210 ETH were burned, over 2,000 ETH were net emitted, contributing to an increased inflation rate for the cryptocurrency.
Martin Köppelmann, founder of Gnosis, has suggested that Ethereum may need to temporarily increase its gas limit to counteract the inflationary effects. Köppelmann pointed out that despite the low base fee of around 0.8 gwei, the network requires a higher rate of 23.9 gwei to offset staking rewards. He proposed that raising the gas limit could be a strategy to boost Layer 1 activity.
The London hard fork, implemented in August 2021, introduced a base fee burn mechanism under EIP-1559, designed to reduce ETH supply by burning a portion of the fees. As base fees correlate directly with network activity, lower fees result in less ETH being burned.
The drop in gas fees is partly attributed to increased migration to Layer 2 scaling solutions and the adoption of blob transactions from the Dencun upgrade in March, which have reduced costs on these networks.
