On the evening of February 22, Bitcoin fell from a peak of 58,000 US dollars to below 48,000 US dollars, a drop of 17%. The number exceeded 150,000 transactions, and the GAS fee once exceeded 1900GWEI (about 69 US dollars), a record high. Doing an on-chain transaction costs tens of dollars, which is undoubtedly unacceptable to ordinary users. We must know that in 2019, when the market is flat, the gas fee of Ethereum is basically maintained at 10-20 GWEI.

secondary title

Death of Ethereum

Ethereum is essentially a virtual machine, and the gas cost of the transaction is mainly composed of the operating cost of the virtual machine. When you send Token or execute a smart contract, Ethereum needs to perform calculations in the process of processing this transaction, and this calculation process consumes network resources. So you have to pay the so-called gas fee (that is, GAS) to let the computer work for you and let the miners package transactions for you.

The gas fee is affected by the transaction demand on the chain, and the miners will give priority to the transaction with the highest gas price. Therefore, as activity on the Ethereum chain increases, so does the use of GAS.

The fundamental reason for the increase in GAS fees is the surge in transaction demand brought about by the prosperity of various DeFi applications, and the continuous increase in the utilization rate of the Ethereum network, which has caused the Ethereum network to be in a serious state of congestion. According to Etherscan's data, the utilization rate of the Ethereum network has been maintained at more than 95%, and the increase in the network utilization rate means that the remaining available space has decreased. In the case of limited space, for miners, they will give priority to packaging those transactions with high gas fees, and some transactions with low gas fees can only wait. Some users will continue to increase the GAS fee in order to complete the transaction as soon as possible, which also leads to a continuous increase in the handling fee.

Now it is normal to pay transaction fees of tens of dollars for Ethereum transactions. At the current rate, the proportion of transaction fees for ordinary users may reach more than 10%. In this case, only a few "giant whales" can benefit from it However, DeFi seems to be drifting away from the goal of "building a permissionless financial infrastructure that benefits the public".

Hyden Adams, the founder of Uniswap, once said:

secondary title

Ethereum's self-help

The congested network and high fees hinder the development of the Ethereum ecosystem. When user needs cannot be fully met, traffic overflow will inevitably occur. As mentioned above, when the transaction fee is higher than the expected income, the user will completely stop participating in the ecology.

This brings opportunities for other public chains to grab the spillover traffic of Ethereum, especially DeFi projects with high-frequency on-chain behaviors such as DEX, which are gradually migrating to public chains such as BSC and HECO with faster transaction speed and lower fees. Both BSC and HECO are "copied" from Ethereum. Based on the existing foundation of Ethereum, they have been improved in terms of efficiency, handling fees and capacity, and are compatible with the Ethereum mainnet. This means that most DeFi can be migrated to BSC or HECO without modification or with only minor changes; in addition, after Ethereum’s market education, users can almost seamlessly and quickly migrate to BSC and HECO applications get started.

In the face of the impact of other public chains, as the number one ecosystem in the encryption field, solving the problem of basic transaction fees has become an inevitable choice for Ethereum to break through the existing development bottleneck.

As mentioned above, behind the high transaction fees of Ethereum is the network congestion caused by the surge in user demand, so the key to solving the problem of basic transaction fees lies in the expansion of the Ethereum network. For Ethereum, Layer2 is a very effective solution.

The idea of ​​Layer2 is to build a second-layer network on the basis of the main chain to help Layer1 share some things and relieve the pressure of Layer1, so as to improve the overall efficiency. In layer2 solutions, there are currently Rollup, State channels, Sidechains, Plasma, Validium, Hybrid solutions, etc.

In practice, Rollup is currently the most attempted layer2 solution on Ethereum, and it is also the most recognized solution by the founder Vitalk. Vitalk pointed out in his article "Rollup Incomplete Guide":

Vitalk also shared in a recent Chinese community that the first batch of Rollups supporting EVM may be launched in March, which will reduce 99% of transaction fees on the Ethereum chain; Vitalk also stated that Optimism and Arbitrum (currently ) is in the leading position.

The Optimism Rollup mentioned by Vitalk is an EVM-friendly Layer2 solution, which can help existing DAPPs and services migrate to Layer2, and can reasonably balance security and scalability. Once the Optimism Rollup solution is successfully applied, it will greatly improve the performance of Ethereum and reduce transaction costs, which will help the existing Ethereum network meet the growing user needs.

At present, the Optimism Rollup scheme mainly includes the following types:

1、Optimistic Ethereum

Optimistic Ethereum is the Optimism team's implementation. Optimism is a team reorganized from the previous Plasma Group, and the co-founder Karl Floersch is a former member of the Ethereum Foundation.

During the testnet stage, Optimistic Ethereum attracted two leading projects, Synthetix and Uniswap, and integrated them into the Coinbase wallet, where users can view balances and transfer funds.

At present, the final stage of the Optimistic Ethereum testnet has been completed, and the mainnet soft launch code has been frozen to facilitate Synthetix's initial trial of the mainnet. This means that Optimistic Ethereum will enter the final stage of the entire product life cycle: from converting contracts to OVM (Virtual Machine on Optimistic), to deploying to the mainnet.

Optimistic Ethereum will open the testnet on March 15th, and there will be a wealth of documents and tools to help projects integrate into the Optimistic Ethereum network.

2、Fuel

Fuel is the implementation of the Fuel Labs team. Fuel Labs was founded by John Adler, the creator of the Optimistic Rollup concept.

In January 2020, Fuel's public testnet was launched and the code was open sourced. Fuel uses the UTXO data model, so it can achieve parallel verification and is browser-friendly. During the testnet phase, Fuel already supports all ERC-20 tokens. In March, they announced the launch of a new Ethereum underlying language, Yul+, as an experimental upgrade to Yul. Yul is a simple and practical low-level grammar designed to further optimize the compilation target while optimizing the efficiency of gas fee usage. potential.

At present, the first version of Fuel, Fuel v1, has been launched on the mainnet, with a throughput of 500 TPS. In addition to simple transfers, Fuel V1 also supports:

Fuel Labs said the release only rolled out a command-line interface for developers, with a user interface wallet and other integrations to follow in the coming weeks and months.

3、Arbitrum

Arbitrum is the implementation of the OffChain Labs team. Ed Felten, co-founder and chief scientist of Offchain Labs, is a professor of computer science at Princeton University and White House chief technology officer and senior adviser during the Obama administration. Arbitrum's investors include Coinbase Ventures, Pantera, Compound and Blocknation.

Arbitrum has the following advantages:

On October 14, 2020, the Arbitrum testnet, open to everyone, went live. On November 6, OffChain announced the migration of Uniswap V2 to the Arbitrum testnet, named Arbiswap. After testing, Arbiswap's single Swap transaction fee is reduced to 1965 GAS, which means that not only 390 swaps per second can be processed on Arbitrum, but also 55 times the GAS fee can be saved.

summary

summary

The "transaction fee attack" launched by BSC and HECO against Ethereum is essentially a duel between "centralized traffic" and "decentralized traffic". The decentralized chain of the centralized exchange is temporarily ahead of Ethereum due to its high performance and low fee rate. Before the Ethereum expansion plan is maturely applied, "centralized traffic" may continue to lead the direction of the DeFi trend, unless something happens a major crisis of confidence.

But in the long run, with the resolution of the scalability problem of Ethereum, the advantages of security and decentralization will emerge, and some of the traffic taken away by BSC and HECO will inevitably flow back to Ethereum. Users in the DeFi ecosystem will form a natural stratification. Users who pay attention to security and decentralization will choose Ethereum, and users who like high-frequency trading will choose BSC or HECO with better performance. Finally, a three-dimensional market structure will be formed to jointly promote The development of DeFi ecology.