Ethereum Gas Prices Hit Four-Year Low, Raising Questions on Network Activity and Layer 2 Solutions

• Ethereum’s average gas price has plunged dramatically, signaling a pivotal shift in its transaction landscape as fees have dipped to around $0.80.

• This drop is attributed to a surge in Ethereum Layer 2 solutions, which are effectively alleviating congestion on the main network by processing off-chain transactions.

• “The movement towards Layer 2 is reshaping how users interact with Ethereum,” notes a recent COINOTAG analysis, highlighting the impact of emerging scaling solutions.

This article explores the drastic reduction in Ethereum gas fees, driven by Layer 2 solutions and reduced mainnet transactions, reflecting a major evolution in the network.

Significant Reduction in Gas Fees

The Ethereum blockchain, a cornerstone of numerous decentralized finance (DeFi) projects and non-fungible tokens (NFTs), has seen its average gas price plummet to around 5 gwei or approximately $0.80 per transaction. This marks an astounding decrease from the record fees exceeding $20 during peak activity periods.

This drop signifies a profound transition in user dynamics, with Ethereum’s daily fees witnessing a dramatic fall from $23 million to $7.5 million as of February 20. According to data from IntoTheBlock, the average cost for executing transactions on the network now sits at under $1 — a stark contrast to previous highs that plagued users.

Source: IntoTheBlock

Unprecedented Growth of Ethereum Layer 2 Solutions

The ascension of Layer 2 solutions, such as Arbitrum, Optimism, and Base, has been pivotal in driving down transaction fees on Ethereum. These platforms enable off-chain processing, allowing Ethereum to scale effectively while maintaining security.

The various L2 networks now facilitate over 1.5 million daily transactions, a staggering rise from 800,000 a year ago, which significantly alleviates congestion on the Ethereum mainnet.

Following the Dencun upgrade, which introduced new functionalities to improve cost efficiency, gas fees on these networks saw reductions of up to 90%. For instance, the current average fee for transactions on Arbitrum has dropped to just $0.15, down from an average of $2 pre-upgrade.

Source: L2Beat

Decline in Mainnet Transactions

Amid this efficiency, Ethereum’s mainnet has experienced a marked decline in network activity, dropping from 1.2 million transactions daily in January 2024 to just over 900,000 in February 2025. This shift aligns with a notable decrease in trading volumes on decentralized exchanges (DEXs), which fell from a peak of $5 billion daily to around $2.62 billion.

The waning interest in speculative ventures such as memecoins and frequent NFT drops has contributed to this trend, leading to a significant easing in demand for block space within the network.

Moreover, post-Dencun, Ethereum’s issuance surpassed burn rates by roughly 197,000 ETH, valued at about $500 million, pointing to a pronounced decrease in fee pressure.

Source: IntoTheBlock

Future Implications for Ethereum

While lower transaction costs could enhance user adoption, a critical concern arises regarding the fragmentation of liquidity across multiple Layer 2 solutions. Platforms like Base, currently boasting a total value locked (TVL) of $8 billion, indicate that Ethereum’s mainnet may pivot away from its traditional role as a primary transaction facilitator, evolving into a security backbone.

Conclusion

The recent drastic drop in Ethereum’s gas fees, driven largely by the adoption of Layer 2 solutions and reduced mainnet activity, signals a transformation in how users interact with the network. This evolution could lead to greater efficiency in transaction processing and enhanced accessibility. However, as the landscape continues to shift, stakeholders must remain vigilant regarding the potential challenges that may arise with liquidity fragmentation and network dynamics.