Ethereum's Layer 1 network has achieved a new milestone, processing a record 1.87 million daily transactions on December 31, 2025, surpassing the previous high of 1.61 million set in May 2021. Despite this surge in activity, transaction fees have dropped to historic lows, averaging around $0.21, with some periods seeing fees as low as $0.15. This marks a significant decline of over 50% year-over-year. The reduction in fees is largely attributed to the Dencun upgrade, implemented in March 2024, which introduced proto-danksharding via EIP-4844. This upgrade allowed Layer 2 rollups to post data more cheaply to Ethereum's main chain, alleviating congestion and reducing costs. As a result, Layer 2 networks like Arbitrum and Optimism have absorbed much of the transaction volume, allowing Ethereum's main chain to operate more efficiently. However, the low fees have impacted Ethereum's deflationary mechanism. Since the Merge in September 2022, Ethereum has burned a portion of transaction fees, but with fees at current levels, the burn rate has decreased significantly, affecting the deflationary pressure on ETH. While the network's accessibility has improved, the economic benefits are increasingly captured by Layer 2 networks, posing challenges for Ethereum's revenue model.