Is the Ethereum Gas fee really as low as possible?

High Gas can lead to a bad user experience, but it can also give Ethereum a sexy P/E.

For ETH holders, high gas fees are a double-edged sword:

  • The upside: high fees mean high P/E ratios, which can lead to more stakers and put deflationary pressure on the ETH supply.
  • The downside: the user experience would be terrible, as users would be forced to pay triple-digit gas for Uniswap transactions.

 

Is the Ethereum Gas fee really as low as possible?

The ideal goal of ETH is to avoid excessively expensive transaction fees while incurring fees, which is difficult on layer 1 public chains (like Ethereum) because once the block space is filled, fees can increase at a rapid rate increase. Transactions are essentially free until blocks are filled, and once they are filled, user bids quickly increase the fee for everyone.

In the current market, most people believe that transaction demand has fallen off a cliff, as the current average transaction cost is about 1/20 of what it was at the peak of the bull market. However, it would be incorrect to view this as a 95% drop in transaction demand.

Due to this dynamic of fees easily soaring, Ethereum does not incur massive fees (and other L1 public chains today incur almost no fees).

Is the Ethereum Gas fee really as low as possible?

The best option for Ethereum might be:

1. Layer 2 networks, ie L2 starts to take a larger share of L1 fees. This would mean moving from the current 2% gas consumed by L2 to a range of 25-30%.

2. “Legacy” apps on L1 continue to incur significant fees due to whale activity.

3. In terms of absolute transaction volume and number of users, L2 quickly surpassed Ethereum L1.

All of this guarantees that Ethereum fees will remain stable at 30-40 gwei and slightly deflationary even if demand surges beyond the levels we have seen in previous bull markets. A little bit higher than that would mean that L2 probably “hasn’t done their job yet” and we’d see a massive increase in L1 market share, which competes with Ethereum.

Is the Ethereum Gas fee really as low as possible?

 

In this dynamic just described, ETH stakers will receive a real yield of around 3-4%. It comes from:

1. Dilute uncollateralized ETH at 1% (this will decrease significantly to these levels over time).

2. MEV, 1% (maybe higher).

3. Tipping, accounting for 1-2%.

What I want to express is:

1. If the ETH P/E ratio becomes too attractive, it is bearish on Ethereum, because it means that L2 has not yet let users get started.

2. L2 should guarantee always “reasonable” Gas levels, but “legacy” application activity on L1 will keep ETH deflationary.

3. Because of these factors, the real yield for ETH stakers “should not” exceed 3-4% for a long period of time. Ultimately, if the technology is successful, demand will always outstrip supply of block space.

Ideally, this dynamic would trend over time as follows:

 

Is the Ethereum Gas fee really as low as possible?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/is-the-ethereum-gas-fee-really-as-low-as-possible/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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