On the evening of February 22nd, Bitcoin fell below 48,000 US dollars from the highest intraday of 58,000 US dollars, a decrease of 17%, which led to a drastic adjustment in the cryptocurrency market. Affected by this, as of 23:00 on the 22nd, no transaction pens were confirmed on the ETH chain. The number of transactions exceeded 150,000, and the GAS fee once exceeded 1900GWEI (approximately US$69), a record high. It takes dozens of dollars to make an on-chain transaction, which is undoubtedly unacceptable for ordinary users. You must know that in 2019, when the market is flat, Ethereum's GAS fee will basically remain at 10-20 GWEI.
The skyrocketing GAS fee is an annoyance for the happiness of Ethereum users. On the one hand, it represents the prosperity of a series of DeFi applications such as DEX, lending, and aggregator on the Ethereum chain. On the other hand, it also reflects that the congestion of Ethereum has become The biggest obstacle restricting its ecological development.
The 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 a Token or execute a smart contract, Ethereum needs to perform calculations in the process of processing this transaction, and this calculation process requires 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 demand for transactions on the chain, and miners will give priority to the transaction with the highest GAS price. Therefore, as activity on the Ethereum chain increases, so will 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 increasing utilization of the Ethereum network has put the Ethereum network in a serious state of congestion. According to the data of Etherscan, the utilization rate of the Ethereum network has been maintained at more than 95%. The increase in the utilization rate of the network means the decrease of the remaining available space. In the case of limited space, miners will prefer to package 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 causes the handling fee to continue to rise.
Now it’s normal to pay tens of dollars in transaction fees for Ethereum transactions. At the current rate, ordinary users may account for more than 10% of the transaction fees for a transaction. In this case, only a few "giant whales" can get from it. Lee, DeFi seems to be moving away from the goal of "building a permissionless financial infrastructure that benefits the general public."
Hyden Adams, the founder of Uniswap, once said:
On Uniswap, we will have 420,000 US dollars for transaction GAS fees every day, which means that 150 million US dollars will be wasted on GAS a year. This is not ridiculous, this is a fact.
The high handling fee is seriously affecting the comprehensive development of the Ethereum ecosystem.
Ethereum's self-help
The congested network and high handling fees hinder the development of the Ethereum ecosystem. When user needs cannot be fully satisfied, traffic overflow will inevitably occur. As mentioned above, when the commission is higher than the expected revenue, users will completely stop participating in the ecosystem.
This has brought opportunities for other public chains to grab the overflow of Ethereum traffic, especially DeFi projects with high-frequency on-chain behaviors such as DEX, which are gradually migrating to public chains with faster transaction speeds and lower fees such as BSC and HECO. Both BSC and HECO are "copied" from Ethereum. Based on Ethereum's existing foundation, they have improved their 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 only minor changes; in addition, after the market education of Ethereum, users can almost seamlessly connect and quickly migrate applications to BSC and HECO. Get started.
In the face of impacts initiated by other public chains, as the number one ecology 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 basic transaction fee problem lies in the expansion of the Ethereum network. For Ethereum, Layer 2 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 to relieve the pressure of layer1, so as to achieve overall efficiency improvement. In the layer2 solution, there are currently Rollup, State channels, Sidechains, Plasma, Validium, Hybrid solutions, and so on.
In practice, Rollup is currently the most tried layer2 solution on Ethereum, and it is also the solution most recognized by the founder Vitalk. Vitalk pointed out in his article "Rollup Incomplete Guide":
Rollup is a powerful two-tier expansion paradigm, which is expected to become the key expansion solution for Ethereum and the cornerstone of Ethereum's expansion in the short to medium term (and possibly in the long term).
In a recent sharing in the Chinese community, Vitalk also stated that the first batch of Rollup that supports EVM may be launched in March. After the launch, it will reduce 99% of the transaction fees on the Ethereum chain; Vitalk also said that Optimism and Arbitrum (currently ) Is in a leading position.
The Optimism Rollup mentioned by Vitalk is an EVM-friendly Layer 2 solution, which can help existing DAPPs and services migrate to Layer 2, and can reasonably balance security and scalability. Once the Optimism Rollup solution can be successfully applied, it will greatly improve the performance of Ethereum and reduce transaction fees, which will help the existing Ethereum network to meet the ever-increasing needs of users.
The current Optimism Rollup solutions mainly include the following:
1. Optimistic Ethereum
Optimistic Ethereum is the implementation plan of the Optimism team. Optimism is a team reorganized by the Plasma Group. Co-founder Karl Floersch is a former member of the Ethereum Foundation.
In the testnet stage, Optimistic Ethereum attracted two top projects, Synthetix and Uniswap, and integrated them into the Coinbase wallet. Users can check the balance and transfer funds in the Coinbase wallet.
At present, the final stage of the Optimistic Ethereum testnet has been completed, and the mainnet soft start code has been frozen, facilitating Synthetix's preliminary mainnet trial. This means that Optimistic Ethereum will enter the final stage of the entire product life cycle: from converting the contract 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 the project integrate into the Optimistic Ethereum network.
2. Fuel
Fuel is the implementation plan of the Fuel Labs team. Fuel Labs was founded by John Adler, who is the creator of the Optimistic Rollup concept.
In January 2020, Fuel's public testnet went live and open source code. Fuel uses the UTXO data model, so parallel verification can be achieved while being browser-friendly. In the testnet phase, Fuel has already supported 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 compilation goals and optimize the use of GAS fees. potential.
At present, Fuel v1, the first version of Fuel, has been launched on the main network, with a throughput of 500 TPS. In addition to simple transfers, Fuel V1 also supports:
1. Support atomic swaps, cross-chain atomic swaps and instant withdrawals through HTLC.
2. Use priority aggregator for soft confirmation.
3. OP_RETURN style output.
4. Payment of fees via ETH or DAI (other tokens will be supported later).
Fuel Labs said that this version only launched a command line interface for developers, and the user interface wallet and other integrations will be launched in the coming weeks and months.
3. Arbitrum
Arbitrum is the implementation plan of the OffChain Labs team. Ed Felten, the co-founder and chief scientist of Offchain Labs, is a professor of computer science at Princeton University and the Chief Technology Officer and Senior Advisor of the White House during Obama's tenure. Arbitrum's investors include Coinbase Ventures, Pantera, Compound and Blocknation.
Arbitrum has the following advantages:
1. Arbitrum is similar to Optimistic Ethereum and can easily support smart contracts.
2. Arbitrum has improved system security through multiple rounds of interaction, and the setting of the exit period will be more friendly to increase user experience.
3. Compared with the Ethereum mainnet, Arbitrum Rollup can save up to tens of times the cost of GAS fees. No matter how much code, storage or calculations are used in the contract, the cost is fixed. Because of this advantage, in November 2020, DeFi derivatives trading platform MCDEX announced the launch of a testnet on the Arbitrum Rollup.
4. Arbitrum's channels and side chains can provide a powerful privacy model. Except for channel participants and sidechain verifiers, no one else can see the code or its internal state. Only public actions (such as transfers) are visible to the outside world.
On October 14, 2020, the Arbitrum testnet is open to everyone. On November 6, OffChain announced the migration of Uniswap V2 to the Arbitrum testnet, named Arbiswap. After testing, Arbiswap's single swap transaction fee was reduced to 1965 GAS, which means that not only can Arbitrum process 390 swaps per second, it can also save 55 times the GAS fee.
The successful implementation of the Layer 2 solution will enable Ethereum to carry a larger ecosystem. The bottom layer of Ethereum will focus more on safe and high-value transactions, while projects and users based on Ethereum will no longer have to worry about excessive fees and slowness. speed. This means that DeFi will be more easily accepted by the general public and become a true financial infrastructure that benefits the general public.
summary
The "transaction fee attack" launched by BSC and HECO against Ethereum is essentially a showdown between "centralized traffic" and "decentralized traffic". The decentralized chain of centralized exchanges is currently ahead of Ethereum due to its high performance and low fee rate. Before the expansion of Ethereum has mature applications, "centralized traffic" may continue to lead the direction of the DeFi tide, unless it happens A major crisis of confidence.
But in the long run, as the scalability problem of Ethereum is solved, the advantages of security and decentralization will appear, and some of the traffic taken by BSC and HECO will inevitably return to Ethereum. Users in the DeFi ecosystem will form a natural layering. Users who pay attention to security and decentralization will choose Ethereum, and users who like high-frequency transactions will choose BSC or HECO with better performance. Finally, a three-dimensional market structure will be formed and jointly promoted. The development of DeFi ecology.