Gas fees on the Ethereum network have dropped to less than 1 gwei, or about $0.06, according to data from Etherscan. The fact that gas fees hit record lows has made the community ask many questions about the use of the largest layer 1 blockchain in the current market.
Gas fees on Ethereum hit a new low. Source: etherscan.io
The main reason for this decline may be the drastic shift of on-chain activity to layer 2 solutions such as Arbitrum (ARB), Optimism (OP), Polygon (POL). Besides, there is also a strong growth of scalable layer 1 blockchains such as Solana (SOL), BNB Chain (BNB), Tron (TRX), Avalanche (AVAX), and Cardano (ADA).
According to JPMorgan, Ethereum is facing stiff competition from these platforms and lacks a clear lead story like Bitcoin. Despite deploying the Dencun upgrade and preparing to test Pectra in February, most of the activity on Ethereum has shifted to layer 2, reducing the demand for the mainnet and leading to a sharp drop in gas fees.
Currently, there are 59 layer 2 rollup projects from the Ethereum blockchain. Source: L2Beat.
Notably, Uniswap, one of the most gas-consuming protocols on Ethereum, is also planning to leave the platform to switch to Unichain.
The move could deal a heavy blow to Ethereum as the price of ETH has fallen by 16% over the past week, currently trading around $2,738.57.
Meanwhile, BlackRock continues to strengthen its position in the crypto market with the move to include ETH in their spot Ethereum ETF.
According to SosoValue data on February 6, the iShares Ethereum Trust (ETHA) fund bought an additional 3,840 ETH, worth about $10.7 million.
It was also the only spot Ethereum ETF to record inflows that day, while other funds such as Grayscale's ETHE did not have any trades.
4H ETH chart on Binance. Source: Tradingview.
Total net inflows into spot Ethereum ETFs in the US currently stand at $3.18 billion, however this figure includes a whopping $3.93 billion withdrawal from Grayscale's ETH.
However, BlackRock's move to buy more could be a signal that the organization still believes in Ethereum's long-term prospects, despite increasingly fierce competition from other blockchains.