Low Ethereum Gas Fees Inflate Supply By 50k ETH In One Month

Ethereum has experienced a significant increase in its supply, with 50,550 ETH entering circulation over the past 30 days due to unusually low gas fees. This influx amounts to $238 million worth of ETH. Since April 14, Ethereum’s supply has grown by 62,646.61 ETH, raising the circulating supply to its highest level since March 4.

The drop in gas prices, which fell below $2 and hit a low of $1.70 on May 18, is the lowest recorded since October 2023. This decrease followed the activation of the Ethereum Dencun upgrade on March 13, which introduced proto-danksharding through EIP-4844. This upgrade significantly reduced Layer 2 transaction costs by replacing gas-intensive calldata with lightweight Binary Large Objects (blobs). As a result, gas fees on Layer 2 networks dropped by over 90%, easing the burden on Ethereum's mainnet.

Despite these benefits, the reduced gas fees have undermined Ethereum's deflationary narrative. Since The Merge in September 2022, which transitioned Ethereum to Proof of Stake, the network’s supply has decreased by 394,678 ETH ($1.5 billion). Under the previous Proof of Work model, 6.376 million coins worth $24.2 billion would have been added to the supply during the same period.

Layer 2 network activity saw a significant increase between February and April, reaching an all-time high of 158 transactions per second (TPS) on April 2. Although throughput dropped to 88 TPS on May 11, it has since rebounded to 121.8 TPS. Arbitrum's growth has been a major driver, processing 2.53 million transactions recently compared to 1.51 million on May 9. Meanwhile, Linea's transaction count increased by roughly 100,100 to 472,800. However, Base experienced a decline as its memecoin trading frenzy cooled, with daily transactions falling by 37% to 1.91 million.

In other blockchain news, NEAR Protocol, a high-throughput, decentralized Layer 1 blockchain, is positioning itself as the leading ecosystem for AI research and applications. NEAR Protocol, which started as an AI company, has pivoted towards blockchain and payments solutions. Co-founder Illia Polosukhin emphasized the importance of user-owned AI to counteract the dominance of a few mega-corporations over intelligence. Following this announcement, NEAR's native token, $NEAR, rallied 3.5% and is up 400% over the past year.

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