Ethereum has been one of the standout cryptocurrencies since the inception of digital currencies. Its status as the most popular Layer-1 protocol and its pioneering status in the invention of DAPPs, DeFi, and NFTs has cemented its place as the second most popular token in the world, only behind bitcoin. Despite these feet, Ethereum has been plagued with its own challenges, as is Bitcoin. It can only perform 15-30 transactions per second, and for a protocol with this many users, the laws of demand and supply will kick in, sending the transaction prices (also known as gas fees) up. The Ethereum gas fees are present to meet two needs. First, they help to incentivize mining operations on the network, and they also prevent a scam from occurring on the network. At some point this year, the Ethereum gas fees were around $61 per transaction, making Ethereum crypto suitable for large investors and not for retail investors. Also, it has given rise to many Ethereum competitors called “ethereum killers.” These Ethereum killers offer the same perks as the Ethereum crypto but do so at a much-reduced cost and faster transaction speed. To keep their place as one of the most important cryptocurrencies in the ecosystem, Vitalik Buterin suggests an EIP to confront Ethereum’s high gas fees directly. What is an EIP? Let us check that out.
EIP (Ethereum Improvement Proposal)
The EIP (Ethereum Improvement Proposal) is a means to effect proposals on the Ethereum network while carrying the community along. Before any change occurs on the Ethereum network, they must be proposed, debated, and perhaps modified (if they are not trashed). EIPs are the basic units of governance on the network, and the move from draft to being accepted or deferred is what determines which suggestions will stay and which won’t.
Ethereum has seen quite a number of Ethereum Improvement Proposals. The EIP-20 talked about the token standards on the network; the EIP-721 was more concerned about the perks for the development of NFTs, coincidentally the same month when the ICO bubble burst, and the most recent EIP, the EIP-1559, also known as the London fork. It marks the start of Ethereum being a deflationary token, as the ethereum burnt in transaction fees is more than the newly-released Ethereum from mining activities. The EIP-1559, though useful for the scalability of the network, will come at the expense of Ethereum miners. The $1.3 billion earned from mining activities in February 2021 will be impossible going forward as the transaction fees will be slashed by more than half. Although the EIP-1559 was meant to tackle the gas fees directly, it has only paved the way for the switch to the proof-of-stake consensus, and subsequently, other ways to reduce the gas fees. Assuredly, the success of the EIP-1559 gave Vitalk Buterin some ideas, and he is suggesting a new EIP to reduce ethereum’s huge transaction cost.
The EIP-4488, Ethereum’s next step to reducing gas fees.
Although the EIP-4488 is Ethereum’s most ambitious approach to reducing gas fees on the network, it is still a short-term fix to a problem that would be completely eradicated by Ethereum upgrade to the proof-of-stake consensus. Ethereum’s latest Improvement Proposal details the step-by-step process of reducing gas fees without compromising security. Rollups like Arbitrum will be the greatest beneficiary as Ethereum will reduce node size, making the network a fully decentralized one that doesn’t need large computers to run.
The EIP-4488 is mainly targeted towards call data. This read-only byte-addressable space keeps the details of a transaction or call,” and while it could reduce the transaction fees by more than four times its current price, it is not fully welcome by all in the Ethereum crypto space. Alex Krusz is one of the Ethereum developers not in support of this, and when asked why he isn’t, he explained that approval of the EIP-4488 will give rise to a system upgrade. While not bad in itself, the indirect result of the upgrade is largely unexpected. He prefers having the whole block affected by a limit rather than a specific call data. Tim Beiko, a core developer of Ethereum, further explained that the call data influences the block size on Ethereum, and it is impossible to reduce gas cost while keeping the same gas limit.
The end results
The proposal for the proof-of-stake consensus has been tagged the EIP-3675, and while it has not been fully designed for public use, it marks the start of the next phase in the history of Ethereum. Most blockchain explorers on the Ethereum network are already putting the info on the Eth 2.0 in a table format, and Vitalik’s call for stakers to keep the integrity of the network has been largely accepted. The criteria for being a validator on the new consensus is simple. A deposit of 32 ETH will be staked and locked until the Eth 2.0 rolls out, and the stakers will be paid a percentage of the transaction fees. Over 270,000 active stakers are on the network, and $8.6 million worth of ETH has been staked. The date of launch of the Eth 2.0 is still unknown, with the project having faced many technical issues. The beacon chain has recently been merged with the existing infrastructure, and the hopes are that the project will go live towards the second half of 2022. The goal is to make Ethereum an environmentally friendly, low gas fee network, and the 100,000 transactions per second the Eth 2.0 offers is indicative of that. Live information on the Eth 2.0 can be seen on redot.com/eth2/ as you can be part of the stakers