Ethereum Fees Drop 58% Despite Rising Network Activity: Is ETH Losing Its Scarcity Advantage?

Ethereum is becoming cheaper to use, but that may not necessarily be good news for ETH holders.

According to a November 2026 report, Ethereum's total transaction fees fell by approximately 58% year-over-year, even as daily mainnet transactions increased by 54% to an average of 2.17 million. The development highlights an interesting contradiction: Ethereum is processing more transactions than ever, but generating significantly less fee revenue and burning fewer ETH tokens.

More Transactions, Lower Fees

Ethereum's median transaction fee has dropped from approximately $0.35 to just $0.035, making the network considerably more affordable for users. However, the decline goes beyond transaction costs. Total fees paid on Ethereum's mainnet fell from approximately 160,676 ETH during the first ten months of 2025 to just 67,665 ETH during the same period in 2026.

That represents roughly 93,000 fewer ETH in transaction fees. The expansion of Layer 2 networks, cheaper data availability following Ethereum's Dencun upgrade, and increased network capacity have all contributed to lower transaction costs. While this is positive for adoption, it creates a challenge for Ethereum's token economics.

The Problem With ETH Burning

Ethereum introduced EIP-1559 to permanently burn the base portion of transaction fees, reducing the circulating supply over time.

This mechanism helped establish the popular Ultrasound Money narrative, suggesting that ETH could become deflationary when token burns exceeded newly issued ETH.

However, lower transaction fees mean fewer ETH tokens are being burned. According to Ultrasound Money, Ethereum's supply has been increasing rather than contracting. The latest supply figures show that issuance is significantly exceeding the amount being burned.

The November report estimates that ETH supply increased by approximately 842,000 tokens between the end of 2025 and October 31, 2026. This weakens the deflationary argument that previously attracted investors to ETH.

Staking Provides a Different Perspective

Ethereum's Proof-of-Stake mechanism rewards validators for securing the network. New ETH is issued as staking rewards, while penalties can reduce the balances of validators who fail to meet their responsibilities.

As more ETH enters staking, the overall issuance also changes, although individual staking returns depend on the amount of ETH participating in validation. This creates an important distinction between investors who stake their ETH and those who simply hold it. Staking rewards can help offset the dilution caused by increasing supply, but non-staking holders do not receive those rewards.

Is This Actually Bad for Ethereum?

Not necessarily. Lower transaction fees are exactly what Ethereum has been working towards. Affordable transactions encourage stablecoin transfers, DeFi activity, tokenization and broader blockchain adoption. The problem is whether increased network usage can eventually translate into sufficient demand for ETH itself.

Ethereum's long-term investment thesis increasingly depends on its role as settlement infrastructure, staking collateral and a key asset within the decentralized finance ecosystem, rather than relying solely on transaction-fee burning.

The number worth watching is the relationship between ETH issuance and ETH burned.

Ethereum is becoming more affordable and processing more transactions, but until network demand catches up with its expanding capacity, the pressure on ETH's scarcity narrative may remain.

For investors, this is an important development to monitor alongside network activity, staking participation and ETH's overall market performance.