Ethereum activity hit ATHs as fees plunge 99%

Ethereum (ETH) on-chain activity has reached new highs this year as mainnet transaction fees have dropped by over 90%.

Ethereum (ETH) revenue has fallen 99% since March, hitting one of the lowest levels in the blockchain’s history, Token Terminal data showed. This revenue is generated from transaction execution fees on Ethereum’s main blockchain.

At the same time, ETH on-chain swaps have reached all-time highs this year, according to L2Beat analytics. Syncracy Capital co-founder Ryan Watkins described these developments as bullish for Ethereum’s on-chain and decentralized finance.

Ethereum’s on-chain activity reaching new highs and fees dropping by 90% is a sign of a bullish market, not a bear market.

The faster per-transaction fees trend toward zero, the better.

North Star aims to bring billions of people globally into the crypto economy, centered on ETH as a programmable currency. https://t.co/J0FGmle5VL pic.twitter.com/ROPGz0hYkT

— Ryan Watkins (@RyanWatkins_) September 2, 2024

Why is activity increasing while Ethereum L1 fees are decreasing?

Fees on Ethereum’s mainnet began to drop after the implementation of the Dencun upgrade in March. Dencun introduced blobs and proto-danksharding technology to the Ethereum ecosystem, allowing layer-2 networks to process more data and transactions.

The update reduced the congestion of Ethereum’s main layer while also improving the L2 utility. As a result, it became cheaper to send transactions between the Ethereum and L2 networks, leading to reduced revenue on Ethereum’s main network.

But lower fees have encouraged users to tap the second-largest blockchain after Bitcoin (BTC) more than ever before. Before Dencun, high gas fees were a common pain point for regular ETH users, and increased activity like airdrops or token claims often rendered the chain nearly unusable.

The decline in revenues and increase in on-chain transactions coincided with Ether gaining attention from Wall Street.

After spot Bitcoin exchange-traded funds (ETFs) launched in January, similar funds backed by ETH were approved by the U.S. Securities and Exchange Commission in July. By the end of August, investors had traded over $2 billion worth of spot Ether ETFs.

The long-term impact on spot ETH ETFs has yet to be seen, and debates continue over whether the development is in keeping with the spirit of Ethereum.