The daily ETH burn rate of the Ethereum network has fallen to its lowest level this year, with base gas fees currently hovering between 1 and 2 gwei.
ETH Burn Rate Drops to Lowest Level of the Year as Gas Fees Drop to 2 Gwei
Only 210 ETH were burned on Saturday, a significant drop from the 5,000 ETH burned on August 5, when gas fees rose to around 100 gwei.
Gnosis founder Martin Köppelmann suggested that Ethereum may need to temporarily increase its gas limit to counter inflationary effects.
Köppelmann noted that despite the low base fee of around 0.8 gwei, the network requires a higher rate of 23.9 gwei to balance staking rewards. He suggested that raising the gas limit could be a strategy to increase Tier 1 activity.
The London hard fork implemented in August 2021 introduced a base fee burn mechanism designed to reduce the ETH supply by burning a portion of the fees under EIP-1559.
Since base fees are directly correlated to network activity, lower fees result in less ETH being burned.
The decline in gas fees is partly attributed to the increased adoption of Layer 2 scaling solutions and the adoption of blob transactions, which have reduced costs on these networks since the Dencun upgrade in March.
ETH is currently trading at $2,550, reflecting a year-to-date increase of around 10%, with a market cap of $305 billion.
*This is not investment advice.