Ethereum base rate collapse causes ETH cream to drop dramatically

The Ethereum network is currently experiencing its lowest level of ETH burn this year. The data suggested the base rate briefly fell to a multi-year low of nearly 0.8 Gwei.

This significant drop in base gas rates has led to a reduction in ETH issuance, with only 210 ETH burned on August 10th, which represented an all-time low for 2024, according to ‘Ultra sound Money’ .

This is a big drop from the figure recorded on August 5th, when base fees increased to about 100 Gwei, causing the daily ETH burn to skyrocket to 5,000 ETH. As a result of these low gas fees, the network’s inflation rate has increased, with net ETH emissions exceeding 2,000 ETH.

Gas cap increase amid low ETH burn

In response to this inflationary trend, Gnosis founder Martin Köppelmann has proposed temporarily increasing the gas cap to increase Layer 1 activity.

In his latest tweet, Köppelmann noted that the base rate is currently at a multi-year low of around 0.8 Gwei, while a base rate of 23.9 Gwei would be needed to offset betting rewards. While it may seem “counterintuitive,” he said increasing the gas cap could be part of a broader strategy to address this problem.

“Basefee right now at a multi-year low of ~0.8 GWEI. 23.9 would be required to offset staking rewards. IMO Ethereum needs to get more L1 activity again and even if it sounds counterintuitive at such rates low, increasing the gas limit can be part of a strategy.

Ethereum gas rate drops below 1 Gwei

The gas fee, the total amount paid to execute a transaction on the Ethereum network, including the base fee and any additional priority fees, also briefly dropped to 0.979 Gwei over the weekend.

The latest figures reflect the effects of the London hard fork (EIP-1559), introduced in August 2021, which implemented a mechanism to burn the base rate to reduce the supply of ETH.

The current decrease in gas rates is mainly due to the migration of users to layer 2 scaling solutions and the adoption of blob transactions from Dencun’s update in March, which have significantly reduced costs in layer 2 networks.

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