If you have conducted transactions on the Ethereum network recently, you may have noticed that gas prices have remained unusually low for an extended period. Data indicates that the average gas fee has been on a steady decline since its 2024 peak of 98.68 gwei on March 5th.
Typically, gas prices closely follow network demand. However, a closer look reveals a puzzle: daily transaction counts have stayed within a range similar to January 2024—when gas fees were over five times higher. Moreover, daily gas usage has not declined. In fact, September 1st, 2024, recorded the highest daily gas consumption of the year.
This suggests that the common assumption—lower gas prices equal lower demand—doesn’t fully capture what’s happening. So what’s really driving this trend? Let’s explore the technical and economic factors behind Ethereum’s sustained low gas fees.
How the Dencun Upgrade Reduced Block Space Demand
A major factor behind declining gas prices is the EIP-4844 upgrade, also known as Proto-Danksharding, introduced in the Dencun hard fork. This update was specifically designed to reduce the costs for Layer 2 (L2) solutions when committing data to the Ethereum mainnet.
Before the upgrade, L2s like Arbitrum consistently ranked among the top gas spenders on Ethereum. For instance, the "Arbitrum: Batch Submitter" address frequently paid over 100 ETH in daily fees. High activity on Arbitrum directly increased gas demand on Ethereum.
After Dencun, the same address began paying single-digit ETH fees. Even during high-traffic events like the LayerZero token airdrop on June 20th—where Arbitrum’s gas usage neared 5T—the cost to post data on Ethereum was only 39.82 ETH.
EIP-4844 achieved this by creating a separate fee market for data “blobs.” This significantly reduced competition for block space between L2 operations and regular user transactions.
As a result, L2 platforms were able to lower fees for their users, which in turn spurred higher activity. For example, Base increased its block gas limit multiple times post-Dencun to enhance throughput. It now batches over 170,000 transactions while paying as little as $1.61 in L1 fees.
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From an ecosystem perspective, Ethereum is now settling nearly 12 times more transactions via L2s than a year ago, while maintaining lower fees across the board.
Currently, an average of 2.2 blobs are included per block. If this average exceeds the target of 3 blobs, blob fees may rise. In such a scenario, L2s might revert to using calldata for data posting if it becomes cheaper. This could reintroduce upward pressure on Ethereum’s gas prices.
The Impact of Private Transactions on Gas Price Volatility
Another crucial factor influencing gas prices is the growing use of private transaction channels.
You might ask: Don’t private transactions still consume gas and require block space? While that’s true, how they are processed affects fee dynamics due to Ethereum’s EIP-1559 fee mechanism.
Under EIP-1559, the base fee for the next block is adjusted based on how full the current block is:
- If a block is less than 50% full, the base fee drops by up to 12.5%.
- If it is more than 50% full, the base fee increases.
Today, many users avoid submitting transactions through the public mempool to protect themselves from MEV (Maximal Extractable Value) attacks—such as front-running or sandwiching. Instead, they use private relay services like MEV Blocker, Flashbots Protect, or built-in protections in wallets like MetaMask and DEXs like CoW Swap.
These private transactions are sent directly to block builders, bypassing the public mempool. This has an unintended effect on gas price volatility.
Builders that rely only on public transactions—often called “vanilla builders”—sometimes struggle to fill blocks. When they produce a block that is only 15% full, the base fee drops. The following block, which may be packed with pending private transactions, then becomes full, causing the base fee to spike.
Vanilla builders account for about 10% of Ethereum blocks, meaning this pattern occurs roughly one in every ten blocks.
Similarly, some MEV builders with limited access to private transaction flows also produce underutilized blocks. For example, during a gas price spike on August 5th, 2024, the builder “rsync-builder.eth” consistently produced low-gas blocks, each time causing a brief dip in fees during an overall upward trend.
In contrast, back in January 2023—when private transactions made up only about 5% of all activity—gas price increases were steep and uninterrupted during high-demand periods.
Today, the prevalence of private transactions moderates gas fee volatility. During high demand, intermittent under-full blocks soften price spikes. During low demand, they accelerate fee reduction.
Frequently Asked Questions
What causes Ethereum gas prices to fall?
Gas prices fall primarily when demand for block space decreases or when capacity increases. Recently, Ethereum’s Dencun upgrade expanded data capacity with blobs, reducing competition for space. Additionally, fluctuations caused by private transaction batching contribute to periodic fee drops.
Will gas prices stay low forever?
Not necessarily. If blob usage exceeds current capacity or if new applications drive high demand for regular block space, fees could rise again. However, ongoing scaling efforts like PeerDAS in the upcoming Pectra upgrade aim to further expand network capacity.
How do private transactions affect gas fees?
Private transactions are batched and sent directly to builders, bypassing the public mempool. When builders using public transactions produce under-full blocks, the base fee drops briefly. This adds volatility but can lead to lower average gas costs over time.
What was the impact of the Dencun upgrade?
The Dencun upgrade introduced blob transactions, which drastically reduced the cost for Layer 2 networks to post data on Ethereum. This freed up block space for user transactions and helped lower overall gas fees.
Are low gas fees a sign that Ethereum isn’t being used?
Quite the opposite. Ethereum’s daily gas usage reached an all-time high in September 2024. Lower fees have enabled more activity both on the mainnet and on Layer 2 chains, supporting more users and complex applications.
Should I wait for low gas fees to make transactions?
While fees are currently favorable, they fluctuate based on network demand. 👉 View real-time tools for gas tracking to optimize your transaction timing and costs.
Conclusion: The Future of Ethereum Gas Fees
The combination of the Dencun upgrade and the growing use of private transactions has led to a notable decrease in Ethereum’s average gas fees. EIP-4844 successfully created a new market for data blobs, reducing continuous demand from L2s. At the same time, private transaction flows have introduced new dynamics in block production, often moderating extreme fee volatility.
Looking ahead, innovations in data availability—such as EigenDA and PeerDAS—may keep blob costs low even as usage grows. The overall trend suggests that Ethereum is successfully scaling while maintaining usability and affordability.
Despite lower fees, the network is busier than ever. Daily gas usage continues to break records, proving that low costs are driving adoption, not decline.
As the ecosystem continues to expand its capacity, new and innovative applications will likely emerge to fill that space. For now, users can benefit from lower transaction costs—making it an ideal time to interact with Ethereum smart contracts, deploy dApps, or explore DeFi platforms.
Whether you’re a developer, trader, or enthusiast, these conditions offer a great opportunity to engage with the Ethereum network more efficiently and cost-effectively.