Key Points
- Ethereum’s daily fees have significantly decreased since the Dencun upgrade.
- The decrease in fees has reduced the deflationary pressure on Ether.
The Dencun upgrade on Ethereum has made scaling solutions more cost-effective, reportedly reducing transaction fees by up to 90%.
The Impact of Dencun Upgrade
This upgrade has not only benefited layer-2 (L2s) solutions but also the base layer of Ethereum. David Alexander II, a user on X (previously Twitter), noted that the gas fees on the mainnet have significantly decreased since Dencun’s implementation on March 14th, while the daily transaction count remains roughly the same.
Before Dencun, Ethereum processed an average of 1.23 million daily transactions, with daily fees averaging $28.7 million. However, the transaction count remains the same, but the fees have now dropped to as low as $7.7 million.
Factors Behind the Fee Reduction
While Dencun may have indirectly contributed to the fee reduction on Ethereum, it’s worth noting that the decline in memecoin frenzy is one of the main reasons behind the slump. Ethereum-based meme tokens like Pepe and Shiba Inu surged in value in early March, keeping the fees high. As the month progressed, traders shifted to Solana in search of higher returns from a swarm of meme coins issued via pre-sales.
With the dip in fees on Ethereum’s mainnet, the rate at which ETH coins were exiting supply slowed down. A certain amount of ETH is burned for each transaction, corresponding to the minimum amount required for a transaction to be valid. The burn rate has seen a sharp decrease in recent weeks, leading to an increase in the inflation rate. This drop in deflationary pressure likely contributed to ETH’s 12% drop since Dencun.
