Ethereum Fees Hit Four-Year Low Amid Gas Limit Increase and Layer-2 Shift

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has experienced a steep drop in network fees, now at their lowest level since 2020. According to IntoTheBlock, Ethereum's total fees fell 59.6% in Q1 2025, totaling just $208 million. This decline coincided with a 49% drop in ETH’s price, resulting in a $170 billion loss in market value—making it ETH’s third worst-performing quarter since 2016.

IntoTheBlock attributes the fee reduction to two key factors: a significant increase in Ethereum’s gas limit and a continued migration of activity to layer-2 (L2) solutions. In February, Ethereum validators approved a gas limit increase to approximately 32 million units, raising the blockchain’s transaction capacity without requiring a hard fork. The last such increase occurred in 2021, when the gas limit doubled from 15 million to 30 million units.

The lower fees and higher transaction capacity come as Ethereum prepares for its next major upgrade, Pectra. Originally set for March, the upgrade is now scheduled to go live on the mainnet on May 7. Pectra faced delays due to finality issues on the Holesky testnet but has since performed smoothly on the Hoodi testnet. Minor issues on the Sepolia testnet were also addressed.

Despite these technical improvements, Ethereum remains under pressure amid broader market weakness. ETH is down 6.3% over the past week, though it has gained 0.64% in the past 24 hours, trading at $1,778 at press time.