Key Takeaways:
Ethereum (ETH) transaction fees on its Layer 1 blockchain fell more than 50% year-over-year to an all-time low of approximately $0.21, even as the network processed a record number of transactions. The divergence challenges the economic model that investors have grown accustomed to, where high activity previously meant high fees and a deflationary supply.
"The Dencun upgrade created a dedicated, discounted lane for Layer 2 networks, pulling a massive volume of activity off the main chain," said one on-chain analyst. "The result was a cascading relief effect. The main chain, freed from congestion, could handle its remaining traffic at a fraction of the old cost."
Data from on-chain analytics sources shows daily transactions on Ethereum L1 peaked at 1.87 million on December 31, 2025, surpassing the previous record of 1.61 million set in May 2021. Despite this record activity, the network’s daily ETH burn from transaction fees hit an all-time low of roughly 53 ETH on some days in 2025. This is a rounding error compared to the thousands of ETH burned daily during peak periods in 2022 and 2023, a direct consequence of the EIP-4844 (proto-danksharding) upgrade implemented in March 2024.
The combination of cheap fees and high activity presents a double-edged sword for ETH as an investment. While lower barriers to entry are driving adoption and network health, the economic value is increasingly captured by Layer 2 networks like Arbitrum and Base, not Ethereum's base layer. This structural shift puts pressure on the "ultrasound money" narrative, which relied on high fees to burn more ETH than was issued, making the asset deflationary. With the burn rate now negligible, the network's inflation dynamics have changed, a factor investors must now re-evaluate.
The shift comes as competitors like Solana (SOL), which gained prominence on a low-fee thesis, are planning their own upgrades. Solana's Alpenglow upgrade targets a major improvement in transaction finality. For Ethereum, the next major catalyst is the Glamsterdam upgrade, planned for the first half of 2026, which aims to increase the base layer's efficiency with a targeted throughput of 10,000 transactions per second. The success of Glamsterdam will be critical in determining if Ethereum's base layer can continue to compete or if it will primarily serve as a settlement layer for a thriving ecosystem of L2s.
This article is for informational purposes only and does not constitute investment advice.
