The Dencun upgrade, launched on March 13, 2024, is considered one of the most significant improvements to Ethereum’s network. The upgrade combined the Cancun upgrade on the execution layer and the Deneb upgrade on the consensus layer, implementing a total of nine Ethereum Improvement Proposals (EIPs). The primary goal was to enhance Ethereum’s scalability and reduce transaction costs for layer-2 networks.

According to YCharts data, the average gas fee on Ethereum has fallen from 72 gwei in 2024 to just 2.7 gwei as of March 12, 2025. NFT sales, which had averaged $145 in gas fees last year, now only cost around $0.65.

Significant Decline in ETH Price

Despite the major drop in gas fees, the price of Ethereum (ETH) has declined 53% over the past year. During the Dencun upgrade in March 2024, ETH was trading above $4,070. As of March 13, 2025, ETH is priced at $1,891, according to CoinGecko.

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Dominik Harz, co-founder of Build on Bitcoin (BOB), commented to Cointelegraph that Ethereum has “underperformed” recently. Harz noted, “Since Trump’s election, Monday’s price drop erased all DeFi TVL gains. Between Solana’s memecoin frenzy and Ethereum’s fractured few months, it’s clear the industry is searching for a new, more sustainable and secure frontier for DeFi.”

Pectra Upgrade Faces Issues During Testing

Ethereum’s next major upgrade, Pectra, was rolled out on its final testnet, Sepolia, on March 5. However, soon after deployment, the team encountered issues with error messages and empty blocks being mined. Ethereum developer Marius van der Wijden confirmed that a fix had been deployed, but an unknown user later triggered the same issue, causing further disruptions.

Harz stated that while these testnet issues may delay the mainnet launch, they are far from Ethereum’s biggest challenge. The Pectra upgrade is expected to double data space for layer-2s, lower costs, and increase execution capacity. However, Harz warned, “While that’s a step in the right direction, the reality is that Ethereum is quickly losing its position as the go-to chain for builders, and Pectra isn’t the fix-all solution to its deeper issues.”

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Given low gas prices, only 210 ETH were burned on Saturday—a record low for the year. On August 5, on the other hand, the daily burn shot to 5,000 ETH as gas prices hit roughly 100 gwei. The network’s inflation rate has increased given such cheap gas costs. Data from The Block indicates that the net ETH emission was recorded at over 2,000 ETH, even while 210 ETH were incinerated.

With this inflationary trend, Gnosis founder Martin Köppelmann has advised momentarily raising the gas limit. “The base fee is at a multi-year low of ~0.8 GWEI. 23.9 would be required to offset staking rewards. In my opinion, Ethereum needs to increase L1 activity again and even if it sounds counterintuitive at such low rates, raising the gas limit can be part of a strategy,” he stated.

Initiated in August 2021, the London steel fork—also known as EIP-1559—introduced a burnt basic charge and a priority fee meant for use as a tip for validators. Higher fees burn more ETH, thereby lowering the supply since the base fee closely connects with network activity.

Increased user migration to Layer 2 scaling solutions and the acceptance of blob transactions brought in by the Dencun update in March have helped lower Layer 2 network costs by means of this drop in gas fees. With a market capitalization of $305 billion, ETH is trading at $2,540, up almost 10% year-to-date.

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