There has long been a need to proffer a solution to the high gas fee problem of Ethereum, the world's most popular Smart Contracts, DApp, and blockchain platform.
The usage of the Ethereum network has dramatically experienced a surge in the past years, but the issue of scalability and high transaction fee has been a significant concern.
However, like every other technology, various blockchains also have been seeking ways to develop either through improved security or by reducing transaction costs such that it attracts a wide range of investors.
One of the fundamental security options blockchains has given its user to explore include the choice of a cold and hot custodial wallet. Also, efforts are being made to reduce the outrageous transaction fee, which has been a significant concern, especially in the Ethereum blockchain. A few development examples made to tackle these issues are Ethereum Sharding, layer 2 Rollups, and the current EIP 4844 solution on the Ethereum blockchain.
Buterin's Take On Ethereum's Transaction Fees
Developers are working relentlessly to make the network easy to scale. So far, they have come up with a collective solution known as the Layer-2 scaling solution. Its goal is to make dApps easy to scale by increasing the speed of transactions and reducing transaction prices while maintaining the primary decentralization and security features indispensable to the blockchain network.
Although the gas fee of most L2 solutions is low compared to Ethereum's main net gas fees, the Layer 2 gas fees are still relatively on the high side. Vitalik Buterin, the Ethereum network co-founder, thinks Ethereum gas fees have to be below $0.05(5 cents) before it can be considered adequate.
In a post by the Bankless podcast host, Ryan Sean Adams shared a screenshot of a picture from the L2 Fees website, comparing the average transaction costs of some listed popular layer-2 networks built on top of the Ethereum network.
He then added a caption that further buttressed his thought about how the layer two solutions have improved Ethereum's transaction costs.
However, Vitalik Buterin doesn't seem to agree with what he considers not expensive downright.
In response to Ryan Adams' tweet, Vitalik Buterin stated that for the price of transactions on Ethereum to be totally acceptable and considered inexpensive, it must be less than 5 cents.
He further declared that they are making significant progress, and the current proto-danksharding development might be just what they needed to solve the high fee problem for a while.
While one L2 solution from the list met Buterin's recommended gas fees, some were close, and some were relatively expensive.
Furthermore, the cost of transactions on the Ethereum mainnet was recently considered reasonably affordable at $3.26 per transaction and $16.31 per token swap. However, this notion changed when gas fees shot up, and users spent millions of dollars minting the latest collection of Non-fungible tokens Yuga Lab recently launched. Thanks to Blockchain explorers, users can monitor these activities, and the eth Blockchain Explorer is no exception.
What Layer 2 Solutions Are They, and Why Are They Important?
Layer 2 solutions are secondary protocols built on an existing layer one blockchain network to solve its scaling problems. Layer 2 is a term used to describe the second iteration of an already operational solution. It is mainly created to either improve the already existing solution or add more functions.
In this context, Layer 2 is simply a collective term used to identify the Ethereum network scaling solutions that function outside of the Ethereum mainnet but take advantage of the decentralization and security of Ethereum L1. Examples of L2 Solutions on Ethereum include Polygon(Matic), Arbitrum, and Polkadot.
As one of the leading blockchains, Bitcoin is primarily built to be an alternative to traditional currencies. It is recognized worldwide and used as a medium of exchange for goods and services.
Ethereum, on the other hand has leveraged well on smart contract to bring traditional finance instruments to the blockchain as decentralized finance.
Ethereum was programmed to enable developers to build and run other blockchain applications on its network. Hence, most of these layer two solutions operate on the network.
Although the Ethereum blockchain is the most widely used and arguably the most secure, certain drawbacks must be addressed. The Ethereum Main net is known to have slow transaction throughput and expensive gas fees.
These Layer 2 solutions are built on top of the Ethereum blockchain, and their goal is to keep transactions secure, very fast, and inexpensive.
Nonetheless, individual L2 solutions have advantages and disadvantages regarding scalability, functionality, and transaction fees. No single layer 2 solution presently fulfills all these demands. However, layer 2 scaling solutions are striving to improve all these aspects; these solutions are called rollups.
What Are Rollups?
Rollup is a growing technology used in layer 2 solutions. Most of these L2 solutions are not built by Ethereum; however, the Ethereum Virtual Machine (EVM) has made the creation of DApps possible on Ethereum. The collections of L2 solutions available on the Ethereum blockchain are separate projects designed on top of the Ethereum network using the rollup technology.
Simply put, the rollup smart contract, based on layer one, can carry out proper transactions on layer two, using the transaction data stored on layer one.
Layer 2 rollups solutions are essential because they expand participation, increase throughput (transaction speed) and reduce gas fees while maintaining the decentralized and security characteristics of the network.
Is Vitalik's EIP 4844 Development The Final Solution To Ethereum's Prolong Transaction Fee Problems?
According to Vitalik's tweet in the earlier part of this article, they are making significant progress, and the EIP 4844 might be enough to help solve the high gas fee problem.
Ethereum Improvement Proposal (EIP 4844) was announced earlier this year and aimed to improve the current Ethereum Sharding mechanism. In sharding, multiple interconnected blockchains work simultaneously to improve transaction throughput. However, in danksharding, rather than creating more space for transactions, the Ethereum network checks if sharded data (blobs) are available to be downloaded from the network.
Ultimately, the EIP 4844 development seeks to create a “stop-gap” by adding approximately 2 MB of space to the block so that the continuously-increasing transaction burdens on the network are reduced.
Will the EIP 4844 solution serves as a short-term remedy to high gas fees while more robust solutions are developed, or will this be the ultimate solution to this challenge?
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