1/Ethereum is the second largest public chain by market value after Bitcoin. More than one million transactions are generated on the Ethereum network every day, the average daily transaction cost on the chain in the past seven days is more than 30 million U.S. dollars (the corresponding data for Bitcoin is 8 million), and the average daily settlement amount on the chain in the past 30 days has exceeded 9 Billion dollars.
2/ Different operations on the Ethereum network have different transmission data sizes and different consumption costs. The calculation of the transaction cost of Ethereum is mainly derived from the multiplication of two concepts, one is the gas price (gas price) and the other is the gas limit (gas limit). When the two are multiplied, the “Ether” (Ether ) Is the transaction cost per unit.
3/ The unit of gas price is gwei, which is equivalent to one part per billion of ether (minus ninth power of ten). The gas limit is 21,000 for the simplest operation of sending Ether, and for more complicated operations, especially involving smart contracts, it is several times higher. For each block, the sum of the gas limit for all transactions also has an upper limit, which currently cannot exceed 12.5 million (so each block on Ethereum can theoretically only have 595 transactions at most), similar to Bitcoin Block size limit.
4/Gas price changes dynamically with the degree of network congestion. Most of the time before 2020, it will be below 20 gwei. In the first half of 2020, before DeFi is booming, most of the time it will be below 50 gwei. After entering 2021, as more people join and participate, the price can exceed 400 gwei at the most crowded day.
5/ The cheapest, the operation of sending ether (eth), according to the data of etherscan.io on February 24th, the current cost is about 0.00294 eth (140 gwei multiplied by 21000), according to the price of ether 1600 USD It’s probably less than five dollars.
6/ If you want to transmit erc20 token, because it involves more data reading and writing and calculation, the cost is generally at least three times or more, currently about 15 US dollars.
7/ If you want to use a smart contract such as uniswap to make a transaction and replace it with another token, it will be more complicated. At present, the ether gas cost of a transaction is more than ten times that of the basic operation, between 40-70 US dollars.
8/uniswap, 1inchexhcange, sushiswap, balancer and other smart contracts that match token transactions consume more than 20% of the network traffic, which is one of the most important reasons for the current Ethernet network congestion and high fees.
9/ These smart contracts of uniswap can be regarded as a free trade port that is completely open for international trading. But the difference is that you don’t have to carry large bags, sleep and sleep in the wind, as you did in the past. There is no need to travel around the world, and there is no challenge of inventory and capital turnover. Basically, you can complete the operation with a single click of the mouse at home, and obtain the confirmation of liquidation within a few minutes.
10/ From this perspective, the gas cost of $70 is actually not expensive. If it is too expensive, it is because your business is too small. If everyone is too expensive, they won’t go again after the last time. But why are there many other people who carry out various operations every day, bearing hundreds of dollars in single transaction fees, are they doing charity, are they making money at a loss, or are they making a fortune?
11/ The first thing to understand is that the gas cost is not fixed, but dynamically changing. If the cost increases temporarily, this is a signal issued by the market to everyone: our demand here is too strong, come and meet our needs. !
12/ When the price rises, large households are usually insensitive. After all, it is these people who don’t say much about the big ones who really push prices up. The biggest complaint is usually Xiao San, “Ethereum is too crowded and crowded with no one to use! House prices here are too expensive, too expensive to be occupied!”. Then they will look for the least resistance reduction Painful program.
13/At this time, if a centralized exchange is also doing blockchain, at the expense of decentralization, providing extremely low transaction fees, and at the same time copying all the new application codes and tools on Ethereum at almost zero cost , Packaging yourself as an ether killer is very tempting for those who want to save money. Because in the short term, mining does seem to make some money. In the end, regardless of whether it is profitable or not, at least it doesn’t need to be like Ethereum, paying tens of dollars, hundreds of dollars in painful transaction fees.
14/Although there are ether overflow traffic and the support of centralized exchanges, this kind of centralized spare tire chain with only more than 20 full nodes is still substantially different from ether in terms of ecological complexity and depth of liquidity. And if, like Ripple (xrp), it is found by the Securities Regulatory Commission, it may face the risk of a sudden drop in traffic.
15/ Smart contracts on truly decentralized platforms, such as uniswap, cannot be blocked. Hayden Adams, the founder of Uniswap, once said that even if one day the regulator told him to turn off uniswap, he raised his arms and shouted to all users, “You guys don’t use uniswap anymore!” to no avail. Because, deployed in
The Uniswap V2: Router 2 on the address is essentially a row of codes that cannot be tampered with by anyone including the original author.
16/Ethereum’s plagiarism, the ecological complexity is always lacking compared with Ethereum. The connotation of ecological complexity here includes: various token assets on the chain, wrapped btc, various smart contracts, various software development tools, liquidity depth, developer community, etc., all are indispensable. No matter how low the transaction cost, if the ecological complexity is low, some things simply cannot be done. It’s like no matter how good the air in the country is, no matter how cheap the prices are, when you get sick and have to undergo major surgery, you have to go back to the big hospital in the city center. And when the transaction costs of the Ethereum main chain periodically drop and new opportunities reappear, the traffic that is only profitable will still return to the Ethereum main chain at any time.
17/ The solution to the decline in Bitcoin network fees that year was largely due to the conversion of currency transfer between exchanges to batch processing, which is equivalent to dozens of people sitting on the same bus. But batch processing in Ethereum is not that simple. Multiple different tokens must be sent to different addresses, and smart contracts must be used. Smart contracts are more complicated than ordinary transactions and cost several times more gas, and in many cases it is impossible to really save costs. For smart contracts involving automatic market maker transactions, batch processing is even more complicated.
18/Rollup, essentially a new batch processing technology on Ethereum, is the most promising two-layer solution for effective expansion before Ethereum 2.0 sharding technology is actually deployed (Ethereum mainnet is equivalent to the first layer) , In theory, the gas cost of a single transaction can be reduced to less than one percent of the original. Rollup is divided into two styles, optimistic rollup, the technical implementation is simpler, because it is first to get on the train and then check the ticket, but it takes a week to withdraw coins to the main chain; zk rollup, the technical implementation is more complicated, but you can immediately mention it without waiting currency.
19/ Various rollup projects have continued to emerge in the past two years. Who can ultimately have a substantial impact on the scalability of the Ethernet mainnet? Whether various wallet software can quickly integrate the new functions of the new project? Various white papers It is still difficult to make a final conclusion about how much the propaganda can deliver. A few high-profile projects in the industry are listed below.
Optimism: A well-known venture capital company a16z invested 25 million U.S. dollars last year. In mid-January, it started a so-called soft start on the main ethernet network, and it has cooperated with Synthetix, a decentralized exchange for synthetic assets.
Uniswap v3: There are speculations that it will be launched in the third quarter of this year or even earlier. It is said that the optimistic rollup scheme will be adopted. Because the uniswap exchange has the deepest liquidity, if it is launched, this may be the most promising project to quickly reduce the cost of the Ethernet main network.
Polygon: Originally called Matic.network, it claims to be an aggregator for various two-layer solutions. The specific launch time is unknown.
Loopring (Loopring Protocol): An exchange that supports zk-rollup technology launched in March 2020, but so far the average daily trading volume has not exceeded 20 million US dollars (original data from coingecko.com)
20/ You can think of projects like rollup as building a subway in a crowded city. Each rollup’s second-tier solution is like a subway line built by residents who raise funds spontaneously. However, it is impossible for one line to alleviate the traffic congestion in the entire city immediately, and the acceptance of the rollup project by the market will take time to verify. Between different two-story solutions, it is also necessary to build a bridge (cross-rollup transaction) that quickly connects without passing through the main network, just as between different subway lines, it is necessary to build underground passages to facilitate passengers to transfer to different lines. Take the Shanghai subway system as an example. From 1993 to the present 28 years, a total of 19 lines have been opened. It is conceivable that various projects to improve scalability on the Ethernet network will be a long-term effort.
21/ If history is a lesson, there can be no panacea to solve the high cost challenges of Ethereum. Before the successful deployment of Ethereum 2.0, a possible development path is:
A two-tier rollup solution that has emerged spontaneously reduces the transaction costs of a certain part of the chain, attracts more traffic into the Ethereum, and promotes the complexity of the ecology.
Because of the influx of these new traffic, an application on Ethereum has become a new bottleneck, network costs have skyrocketed again, and the traffic has overflowed to other centralized spare tire public chains.
Large households made a fortune, Xiao San complained loudly, public opinion began to be pessimistic again, the market value of the spare tire public chain rose (similar to the suburban housing price increase in a certain period of time than the city center housing price increase), and packaged themselves as an ether killer to attract traffic.
New Layer 2 solutions have emerged on the Ethernet again, the cost of the ether has dropped, and the traffic has returned to the ether. Its ecology is further complicated, and the difference between the actual ecological complexity of the spare tire public chain continues to increase.
22/ The cost on the Ethereum network, compared with other spare tire public chains, will maintain a high cost pattern for a long time. Just like the housing prices in downtown Shanghai are always higher than those in suburbs such as Jiading or Fengxian. In the world, there will always be faint whispers, spreading the legend that “housing prices are too expensive for no one to live”.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.