Ethereum Gas Fees Plunge to 4-Year Low

Ethereum gas fees experienced a significant 70% drop, reaching their lowest point in four years on February 20th. Daily fees plummeted from $23 million to $7.5 million, with the average gas price falling to approximately 5 gwei (around $0.80 per transaction). This sharp decrease from the $20+ fees seen in 2024 has sparked considerable interest and analysis within the crypto community.

Factors Contributing to the Drop

Two key factors are driving this dramatic decline in Ethereum gas fees:

• The Rise of Ethereum Layer-2 (L2) Solutions: The increasing popularity of L2 solutions like Arbitrum (ARB), Optimism (OP), and Base is significantly reducing the load on the Ethereum mainnet. These solutions process transactions off-chain, leveraging Ethereum's security while offering significantly lower costs. Combined, L2 networks now handle over 1.5 million daily transactions, a substantial increase from 800,000 a year ago. The Dencun upgrade further enhanced this, reducing L2 data costs and leading to gas fee reductions of up to 90% on some networks. For example, Arbitrum's average fee is now $0.15, down from $2 before the upgrade. This cost efficiency is diverting activity from the mainnet, alleviating congestion and lowering fees.
• Decreased Mainnet Network Activity: Ethereum's mainnet has also seen a slowdown, with daily transactions falling from 1.2 million in January 2024 to just over 900,000 in February 2025. This aligns with a decrease in daily decentralized exchange (DEX) volumes, from a 2024 peak of $5 billion to $2.62 billion. The reduced hype around memecoins and speculative NFT drops has also contributed to lower demand for block space. Since the Dencun upgrade, ETH issuance has exceeded burns by 197,000 ETH ($500 million), further illustrating decreased fee pressure.

Implications and Future Outlook

While cheaper transactions can boost adoption, the increasing fragmentation of L2 solutions presents potential challenges, including the risk of liquidity dilution. As L2s like Base, with its $8 billion in Total Value Locked (TVL), continue to flourish, Ethereum's mainnet may transition into primarily a security backbone rather than a central transaction hub. Codeum, a leading platform for blockchain security and development, offers services such as smart contract audits, KYC verification, custom smart contract and DApp development, tokenomics and security consultation, and partnerships with launchpads and crypto agencies to help navigate this evolving landscape.