This year's defiant drop in deFi, NFT sales, and meme coin trading has sparked supply dynamics in Ethereum, making it difficult to maintain a balance of supply.
On a seven-day model, Ethereum is more scarce than it burns, while on a yearly framework, it issues more than it burns.
What is going on with the network's supply dynamics, why are transaction fees decreasing, and how does it look like for the future of Ethereum?
EIP-1559, a fee-burning mechanism, was implemented in Ethereum back in August 2021. Since then, the supply has had a direct connection to gas prices. Gas prices will cause more ETH to be burned and vice versa.
But the gas prices are falling and the transactional volume is less, leading to a test of this label.
For sending ETH through the protocol, transaction fees are about $0.28. A trade on Uniswap currently costs $2.76, a far cry from its $4.17 price in early September and a markup not seen since the collapse of FTX in late 2022.
Chris Martin, Amberdata's head of research, told Decrypt that the reasons for declining gas prices are three-fold.
He argued that lower fees can bring more users and activity on-chain, but more users ultimately lead to more congestion.