On June 30, the Ethereum network recorded its lowest fees since 2016. According to data provided by Etherscan, the average gas fee is currently sitting at just 3 Gwei ($0.14), according to data provided by Dune Analytics.

Gas fees refer to the cost of various operations on the Ethereum blockchain. By paying gas fees, users help to ensure the security of the network. Apart from incentivizing validators, gas fees are also meant to prevent various spam attacks.

During the 2021 bull run, Ethereum's gas fees were exorbitantly high due to high demand in the non-fungible sector (NFT). This prompted some pundits to argue that the network was unsustainable and gave rise to more affordable alternatives such as Solana.

This time around, Ethereum gas fees are hitting extremely low levels despite the fact that the network is also experiencing strong transaction activity. In fact, the volume of the leading altcoin is on the same level as it was during the beginning of the year.

The plunging fees can be explained by a higher level of efficiency of the Layer-1 market due to the combination of Layer-2 volume and the introduction of “blob transactions” with EIP-4844 that helped to significantly boost Ethereum's scalability.

"We will still see gas spikes above 15 gwei in times of higher activity. It’s just that overall the gas market has been more efficient post 4844. So we’ll have more affordable days than expensive ones," Pistachio Fi founder Brian Smocovich said in a post on the X social media network.

Back to inflation

The massive drop in fees means that Ethereum is no longer a deflationary network since the amount of fees to burn is very small. This flies in the face of those who were pushing the narrative about "ultra sound money" prior to the Dencun upgrade.

Over the past seven days, 14,393 ETH has been added to the network, according to data provided by ultrasound.money. This translates into annual supply growth of 0.62%.

The total supply of Ethereum currently stands at 120,185,061 ETH, which means that it is on track to reach a new 2024 peak.