Silicon Valley Wang Chuan: Why is the fee of Ethereum so high?
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, Author: Silicon Valley Wang Chuan, reprinted by Odaily with authorization.
1/ Ethereum (Ethereum) is the second largest public chain after Bitcoin. More than one million transactions are generated on the Ethereum network every day. The average daily transaction fee on the chain in the past seven days has exceeded 30 million U.S. dollars (the corresponding data for Bitcoin is 8 million), and the average daily liquidation amount on the chain in the past 30 days has exceeded 90 million U.S. dollars. billion dollars.
2/ For different operations on the Ethereum network, the size of the transmitted data is different, and the consumption cost is also different. The calculation of the transaction cost of Ethereum is mainly obtained by multiplying two concepts, one is the gas price (gas price), and the other is the gas limit (gas limit). ) is the transaction fee in units.
3/ The gas price unit is gwei, which is equivalent to one billionth of an ether (ten to the negative ninth power). The gas limit is 21,000 for the simplest operation of sending ether, and several times higher for more complex operations, especially those involving smart contracts. For each block, the sum of gas quotas for all transactions also has an upper limit, which currently cannot exceed 12.5 million (so each block on Ethereum can theoretically only have a maximum of 595 transactions), similar to Bitcoin's block size limit.
4/ Gas price changes dynamically with the degree of network congestion. Before 2020, it was below 20 gwei most of the time. In the first half of 2020, before DeFi became popular, it was below 50 gwei most of the time. After entering 2021, as more people join and participate, the price can exceed 400 gwei at the most crowded time every 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 0.00294eth (140 gwei multiplied by 21000), according to the price of ether $1600 That's probably less than five dollars.
6/ If you want to send erc20 token, because it involves more data reading and writing and calculation, the cost is generally at least three times more, currently about fifteen dollars.
8/ uniswap,1inchexhcange,sushiswap,7/ If you want to use a smart contract like uniswap to do transactions and switch to other tokens, it will be more complicated. At present, the ether gas fee for a transaction is more than ten times that of the basic operation, ranging from 40 to 70 US dollars.
Balancer and other smart contracts that match token transactions consume more than 20% of the traffic on the network, which is one of the most important reasons for the current congestion and high costs of the Ethereum network.
9/ The smart contracts of uniswap can be regarded as a completely open trade free port for international dealers to do business. But the difference is that you don't need to carry big bags and small bags, eat and sleep in the open, and do business through customs like in the past. There is no pain of traveling around the world, no challenges of inventory and capital turnover, basically just click the mouse at home to complete the operation, and get the confirmation of liquidation within a few minutes.
10/ From this perspective, the gas fee of $70 is actually not expensive. If it's too expensive, it's because your business is too small. If everyone thinks it's too expensive, they won't go again after the last time. But why are there many other people who go on and on every day to carry out various operations and bear a single transaction fee of hundreds of dollars? Are they doing charity, making money at a loss, or making a fortune silently?
You can refer to the author's old article
Wang Chuan: The perspective of the person who pays the most is the perspective of God
11/ The first thing to understand is that the gas fee is not fixed, but changes dynamically. If the gas fee rises temporarily, this is a signal from the market to everyone: the demand here is too strong, come and meet our demand. !"12/ When the price rises, the big players are usually indifferent. After all, it is the big players who don't talk too much that really drive the price up. The loudest complainer is often Xiaosan,"Ethereum is so crowded that no one uses it! The housing prices here are so expensive that no one lives here!
. Then they will look for the solution of least resistance to reduce pain.
13/ At this time, if a centralized exchange also operates a blockchain, at the expense of decentralization, it provides extremely low transaction fees, and at the same time copies all new application codes and tools on Ethereum at almost zero cost , Packaging itself as an ether killer is very tempting for Xiao San who want to save money. Because in the short term, mining does seem to make some money. In the end, it doesn’t matter whether it is profitable or not, at least there is no need to pay tens of dollars or hundreds of dollars in painful transaction fees like Ethereum.
14/ Although there is 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 liquidity depth. And if, like Ripple (xrp), it is found fault by the China Securities Regulatory Commission, it may face the risk of a sudden drop in traffic.
15/ Smart contracts on a truly decentralized platform, such as uniswap, cannot be blocked. Hayden Adams, the founder of Uniswap, once said that even if the regulator told him to shut down uniswap one day, he shouted to all users, "Don't use uniswap!" It will not help. Because, the Uniswap V2: Router 2 deployed on the address 0x7a250d5630B4cF539739dF2C5dAcb4c659F2488D is essentially a row of codes that cannot be tampered with by anyone including the original author.
16/ The plagiarists of Ethereum, whose ecological complexity is always lacking compared to 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 of which are indispensable. No matter how low the transaction fee is, if the ecological complexity is low, some things cannot be done at all. It's like no matter how good the air is in the countryside and how cheap the prices are, when you get sick and need major surgery, you have to go back to the big hospital in the city center. However, when the transaction fees of the Ethereum main chain periodically decline and new opportunities reappear, the profit-seeking traffic will return to the Ethereum main chain at any time.
18/ Rollup,17/ The solution to the decline in Bitcoin network fees in those years largely came from the fact that the transfer of coins between exchanges was changed to batch processing (batch processing), which is equivalent to dozens of people sitting on the same bus. However, it is not so simple to do batch processing in Ethereum. To send multiple different tokens to different addresses, smart contracts must be used. Smart contracts are more complicated than ordinary transactions and consume several times more gas. In many cases, they cannot really save costs. Smart contracts involving automatic market maker transactions are more complicated to do batch processing.
In essence, it is a new batch processing technology on Ethereum. It is the most promising second-tier solution for effective expansion before the actual deployment of Ethereum 2.0 sharding technology (Ethernet mainnet is equivalent to the first layer). In theory, it can Reduce the gas fee consumed by a single transaction to less than one percent of the original. Rollup is divided into two styles, optimistic rollup, the technical implementation is simpler, because you need to wait for a week to withdraw the coins to the main chain; zk rollup, the technical implementation is more complicated, but you can withdraw immediately without waiting currency.
19/ Various rollup projects have emerged in the past two years. Who can ultimately have a substantial impact on the scalability of the Ethereum mainnet? Whether various wallet software can quickly integrate new functions of new projects? It is still difficult to draw conclusions on how much the propaganda can be fulfilled. A few high-profile projects in the industry are listed below.
- Optimism: A well-known venture capital firm a16z invested 25 million US dollars last year. In mid-January, it started the so-called soft launch on the Ethereum mainnet, and cooperated with Synthetix, a decentralized exchange for synthetic assets.
- Uniswap v3: It is speculated that it will be launched in the third quarter of this year or even earlier, and it is said that the optimistic rollup scheme will be adopted. Because the uniswap exchange has the deepest liquidity, if launched, it may be the most promising project to quickly reduce fees on the Ethereum mainnet.
- Polygon: formerly known as Matic.network, it claims to be an aggregator of various second-tier solutions, and 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/ Projects such as rollup can be regarded as building subways in crowded cities. The second-layer solution of each rollup is like a subway line built by residents themselves. However, it is impossible for one line to alleviate the traffic congestion of the entire city immediately, and it will take time to verify the acceptance of the rollup project by the market. Between different second-tier solutions, it is also necessary to build a fast connection bridge (cross-rollup transaction) that does not pass 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. Taking 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 any guide, it is impossible to have a panacea to completely solve the high-cost challenges on Ethereum at once. Before the successful deployment of Ethereum 2.0, a possible development path is:
-- A layer-2 rollup solution that continues to emerge spontaneously reduces the transaction cost of a certain part of the link, attracts more traffic to Ethereum, and promotes the complexity of the ecology.
-- Because of the influx of new traffic, a certain application on Ethereum has become a new bottleneck, the network fee has skyrocketed again, and some of the traffic has overflowed to other centralized spare tire public chains.
-- Big households get rich silently, small households complain loudly, public opinion becomes pessimistic again, and the market value of the spare tire public chain rises (similar to the increase in housing prices in the suburbs exceeding the increase in housing prices in the city center for a certain period of time), and packages itself as an ether killer to attract traffic .
-- New layer-2 solutions have emerged on the Ethernet, and the cost of the Ethernet has dropped, and the traffic has returned to the Ethernet. Its ecology is further complicated, and the difference in the actual ecological complexity of the spare tire public chain continues to widen."22/ The fees on the Ethereum network, compared to other spare tire public chains, will remain relatively high for a long time. Just like the housing prices in the center of Shanghai are always higher than those in the suburbs such as Jiading or Fengxian. In the world, there are always faint whispers spreading"The price is too expensive and no one lives
