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Home Ethereum

Ethereum gas fees crash 70% to 4-year lows – What’s driving the deep drop?

February 21, 2025
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Ethereum gas fees crash 70% to 4-year lows – What’s driving the deep drop?
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Journalist

Posted: February 21, 2025

  • A surge in Ethereum Layer 2 solutions have offloaded some transactions.
  • Decrease in network activity as activity to fee ratio depict could have a hand in this decline.

Ethereum’s [ETH] blockchain, which is at the center of powering many projects across the crypto ecosystem including DeFi and NFTs, witnessed a staggering 70% crash in gas fees, hitting a four-year low as of the 20th of February.

The daily fees dropped from $23 million to $7.5 million.

According to data from IntoTheBlock, the average gas price has plummeted to around 5 gwei, translating to roughly $0.80 per transaction — a sharp decline from the $20-plus fees seen during peak activity in 2024.

Source: IntoTheBlock

This has left analysts and users pondering the forces behind this drop. Two primary drivers were surge in Ethereum L2s offloading transactions and a decrease in mainnet network activity.

Rise of Ethereum L2 solutions

The rise of L2 solutions like Arbitrum [ARB], Optimism [OP], and Base, which process transactions off-chain while leveraging Ethereum’s security, has been one of the factor contributing to the low fee values.

L2 networks now handle over 1.5 million daily transactions combined, up from 800,000 a year ago.

Following the Dencun upgrade which introduced “blobs” to reduce L2 data costs, gas fees on these networks have dropped by as much as 90%, with some costing mere cents.

For instance, Arbitrum’s average fee is now $0.15 compared to $2 before the upgrade. This cost efficiency has siphoned activity from the mainnet, easing congestion and slashing fees.

Source: L2Beat

For Rollups, data is posted but still reduce activity on the mainnet.

See also  BlackRock Ethereum Holdings Surpass 1.2 Million ETH Amidst Strong Institutional Adoption

Validiums and Optimiums, similar to Rollups, also periodically post state commitments of transactions that are validated by Ethereum, however data is not posted on the mainnet.

Declining network activity

Meanwhile, ETH’s mainnet saw a slowdown with decline in daily transactions from 1.2 million in January 2024 to just over 900,000 in February 2025.

This dip aligned with volumes on DEXs falling to $2.62 billion daily, down from a 2024 peak of $5 billion.

The waning hype around memecoins and speculative NFT drops has further softened demand for block space.

Since the Dencun upgrade, ETH issuance has exceeded burns by 197,000 ETH, or $500 million, indicating decreased fee pressure.

ETH

Source: IntoTheBlock

Cheaper transactions could spur adoption, but there is potential for challenges as that L2 fragmentation might dilute liquidity.

As L2s like Base — boasting $8 billion in TVL — continue to thrive, Ethereum’s mainnet may evolve into a security backbone rather than a transaction hub.

Next: Solana ETF faces key deadline—Why and when?

READ ALSO

Ethereum Looks Ready To Break Out Of 4-Year Consolidation, Analyst Says Price Will ‘Go Insane’

Binance loses 300K ETH – Here’s what it means for bulls eyeing $2.7K

Avatar

Journalist

Posted: February 21, 2025

  • A surge in Ethereum Layer 2 solutions have offloaded some transactions.
  • Decrease in network activity as activity to fee ratio depict could have a hand in this decline.

Ethereum’s [ETH] blockchain, which is at the center of powering many projects across the crypto ecosystem including DeFi and NFTs, witnessed a staggering 70% crash in gas fees, hitting a four-year low as of the 20th of February.

See also  Justin Sun cashes out 19,000 ETH amid Ethereum's rally - details here

The daily fees dropped from $23 million to $7.5 million.

According to data from IntoTheBlock, the average gas price has plummeted to around 5 gwei, translating to roughly $0.80 per transaction — a sharp decline from the $20-plus fees seen during peak activity in 2024.

Source: IntoTheBlock

This has left analysts and users pondering the forces behind this drop. Two primary drivers were surge in Ethereum L2s offloading transactions and a decrease in mainnet network activity.

Rise of Ethereum L2 solutions

The rise of L2 solutions like Arbitrum [ARB], Optimism [OP], and Base, which process transactions off-chain while leveraging Ethereum’s security, has been one of the factor contributing to the low fee values.

L2 networks now handle over 1.5 million daily transactions combined, up from 800,000 a year ago.

Following the Dencun upgrade which introduced “blobs” to reduce L2 data costs, gas fees on these networks have dropped by as much as 90%, with some costing mere cents.

For instance, Arbitrum’s average fee is now $0.15 compared to $2 before the upgrade. This cost efficiency has siphoned activity from the mainnet, easing congestion and slashing fees.

Source: L2Beat

For Rollups, data is posted but still reduce activity on the mainnet.

Validiums and Optimiums, similar to Rollups, also periodically post state commitments of transactions that are validated by Ethereum, however data is not posted on the mainnet.

Declining network activity

Meanwhile, ETH’s mainnet saw a slowdown with decline in daily transactions from 1.2 million in January 2024 to just over 900,000 in February 2025.

This dip aligned with volumes on DEXs falling to $2.62 billion daily, down from a 2024 peak of $5 billion.

See also  Ethereum targets March 2025 for ambitious Pectra upgrade rollout

The waning hype around memecoins and speculative NFT drops has further softened demand for block space.

Since the Dencun upgrade, ETH issuance has exceeded burns by 197,000 ETH, or $500 million, indicating decreased fee pressure.

ETH

Source: IntoTheBlock

Cheaper transactions could spur adoption, but there is potential for challenges as that L2 fragmentation might dilute liquidity.

As L2s like Base — boasting $8 billion in TVL — continue to thrive, Ethereum’s mainnet may evolve into a security backbone rather than a transaction hub.

Next: Solana ETF faces key deadline—Why and when?
Tags: 4yearCrashDeepdrivingDropEthereumFeesGasLowsWhats

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