Macauley Peterson

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/research">subscribe</a>.



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Ethereum All-Core Devs (ACD) held their final call of 2024 yesterday, which offered key updates on plans to raise the gas limit and progress toward the Pectra upgrade. Discussions revealed the community’s ongoing efforts to balance execution-layer changes, consensus-layer coordination and EIP implementation, reflecting Ethereum’s commitment to “build-in-public” iterative improvement.



In a bold but measured move, Ethereum developers are preparing for a gas limit increase, <a href="https://www.coindesk.com/tech/2021/04/22/ethereum-gas-limit-hits-15m-as-eth-price-soars">mirroring</a> a 20% rise seen over three years ago. This time, the proposed increase aims for 36 million gas, though significant technical constraints temper enthusiasm for higher thresholds. The primary limitation is the consensus layer’s &#8220;GOSSIP_MAX_SIZE,&#8221; which restricts validator block transmission to 10 MiB, equivalent to roughly 10.48 MB.&nbsp;



On the <a href="https://blockworks.co/news/ethereum-devs-milestone-call">Mekong testnet</a> — used for Pectra fork testing — the gas limit has already increased to 36 million, offering a stable testing ground for network performance under higher limits.



While the Mekong testnet runs stably with these changes, developers cautioned against increasing the mainnet gas limit beyond 40 million without addressing the gossip-layer constraints. Validator clients, such as Prysm, face challenges in dynamically adjusting gas limits, which underlines the need for further development.



An increase to the gas limit does not need to wait for a hard fork but can be signaled by validators in support of such a change. To date, only 16.8% <a href="https://gaslimit.pics/">have done so</a>, but the trend is up. Campaigns like PumpTheGas.org aim to build more momentum.



The <a href="https://blockworks.co/newsletter/research/issue/post_a2d3d0b2-7573-4379-a2d8-db9d7c7dc488">Pectra upgrade</a> remains a centerpiece of Ethereum’s 2025 roadmap. It’s on track for a Q1 release, with developers targeting a Devnet-5 launch by year-end. Changes discussed on the call include replacing EIP-7742 with EIP-7840 to offer more flexibility in managing &#8220;blob counts&#8221; — a key element for scaling Ethereum and supporting layer-2 rollups.&nbsp;



By allowing developers to set maximum and target blob counts independently, the network can balance scalability (by allowing more data blobs) with stability (by maintaining operational safety limits). This separation makes it easier to optimize block capacity without overloading the network.



Additionally, EIP-2537 focuses on gas repricing for <a href="https://en.wikipedia.org/wiki/BLS_digital_signature">BLS</a> (Boneh-Lynn-Shacham) precompile operations, which are essential for cryptographic computations in Ethereum. The proposal adjusts gas costs for specific mathematical operations, ensuring that resource-intensive tasks are priced fairly while removing inefficiencies like redundant operations. These updates enhance network efficiency, optimize resource usage and improve cost fairness for developers.



An EVM resource pricing working group will launch in January. This group will work on harmonizing gas cost calculations across various operations, aiming to improve efficiency and fairness in Ethereum&#8217;s fee structure.



EIP-4444, which schedules the rollout of pre-Merge history expiry for May 1, 2025, requires additional testing to finalize.&nbsp;



The call also underscored the need for clearer validator node requirements, with developers seeking community feedback. A further proposal to redefine “Meta” EIPs as solely process-related could simplify hardfork management.&nbsp;



Ethereum’s deliberate and collaborative approach to development was evident throughout the discussions. The Pectra upgrade and proposed gas limit increase reflect the network’s ambition to expand its technical capabilities while prioritizing stability.



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Ethereum to ramp up gas limit as Pectra progresses

Steve Gerbino

Fees are killing Web3 — not because they’re expensive (many blockchains and layer-2s boast fees as low as fractions of a cent), but because their very existence creates friction for users.



Fees don’t just cost money — they cost usability. Users are blocked from interacting onchain unless they hold a given blockchain’s native token. Want to use Ethereum? You’ll need ETH. On Solana? You’ll need SOL. Every network has its own currency.



Before new adopters can engage with anything — be it a token transaction, an NFT mint or a decentralized app — they must navigate the process of obtaining and securely storing the proper native gas asset.



For seasoned crypto enthusiasts, this might feel like second nature. You, of course, are a tech savant. You’re reading a crypto publication and you probably learned how to go to an exchange, share your bank details, obtain a token, store it on a hardware wallet, connect to MetaMask, exchange it for another token that you’ll use to power your transaction…and so on ad nauseam.



Read more: <a href="https://blockworks.co/news/empire-newsletter-mass-adoption-as-priority">Is mass adoption still crypto’s most important goal?</a>



And this is all fine if you’re using a blockchain for DeFi (for example). You don’t mind the learning curve if there’s a clear financial incentive.



But…for the next billion users? Do we really expect a billion Facebook users to jump into this tangle of counterintuitive technobabble and make it work? No. It’s not going to happen. The only way for our industry to move beyond the “early adopters” phase and start onboarding the “early majority” is to eliminate these barriers. We need to make this process as intuitive and simple as using the internet we’re looking to replace.



And that means no more fees. Ever. Period.



Looking back, fees served several critical functions in blockchain&#8217;s early days. They acted as a deterrent to spam by requiring a small cost for each transaction, effectively discouraging malicious actors from overloading their respective networks with meaningless activity.



Read more from our opinion section: <a href="https://blockworks.co/news/slow-defi-infrastructure-curbs-mass-adoption">DeFi’s slow infrastructure is holding back mass adoption</a>



At the same time, fees provided miners with financial incentives to validate and secure transactions, ensuring the network’s integrity and sustainability, especially as block rewards decreased over time. Fees also allowed users to prioritize transactions during periods of high demand.



This framework was groundbreaking in its time, but that was nearly 16 years ago. With advances in blockchain technology and shifting user expectations, isn’t it time to rethink this outdated approach and explore what’s next?



To start with, we need to shift focus onto building apps that feel seamless and intuitive for users. Imagine a platform where users can engage freely — minting NFTs, sharing content or transacting — without ever needing to think about gas fees.



What if apps operated on an entirely different financial model — one where developers could delegate the ability to transact to users, entirely eliminating fees and the need for tokens?



We’ve seen attempts to address this before; for instance, protocols that claim to be “feeless” by covering fees on behalf of users in a bid to win their loyalty. But such models are unsustainable. They depend on temporary funding or token incentives that distort the market, create reliance on artificial subsidies and inevitably deplete with time.



Rather, I&#8217;m talking about a completely free-to-use model that doesn’t <a href="https://blockworks.co/news/the-future-of-web3-needs-zero-gas-fees">cost anything at all</a>.



There are a variety of ways a truly feeless blockchain network could be accomplished. One approach involves allocating network resources to users, which are consumed during transactions and automatically regenerate over time. Hardcoding this directly into the network would eliminate the need for users to pay fees directly while ensuring the network remains secure and efficient.



Or perhaps more developers could focus on alternative consensus mechanisms, such as directed acyclic graph (DAG) structures, where users validate each other’s transactions without relying on miners or traditional fees.



Read more: <a href="https://blockworks.co/news/ethereum-consensus-beam-chain">Rethinking Ethereum consensus with Beam Chain</a>



Regardless of the path taken to get there, our end goal should be an ecosystem where developers can build apps that look and feel just like the ones the uninitiated use every day — intuitive, seamless and free of unnecessary friction.



Web3 was never supposed to change the world for a few million crypto enthusiasts. It was supposed to make digital life better for everyone. But instead of tackling the root of Web3’s dysfunction, successive protocols have doubled down on the fallacious assumption that fees are an unavoidable necessity.



While these challenges continue to hinder mainstream adoption for now, the tides appear to be changing. And I&#8217;m pretty sure that in a few years, the idea of paying to use a blockchain will seem as antiquated as the landline.



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Unless Web3 changes, the ‘next billion users’ are never coming

Imagine a highway: The more lanes you have, the more cars can travel simultaneously without creating a traffic jam.



For a blockchain network, a high-throughput sequencer acts to widen that highway — allowing far more data and complex operations to flow through smoothly. This is especially important for applications such as onchain games, demanding DeFi protocols and social apps, where large volumes of transactions and interactions need to be processed without delay.



Sequencer throughput determines how much computational work a blockchain can process in a given time, directly impacting the scalability and efficiency of dapps. Higher throughput allows the network to manage spikes in user activity and support more complex, resource-heavy applications.



Today, Conduit announced a 10x improvement in throughput with the launch of G2, which it claims is the world’s most powerful sequencer. G2 is based on a purported computational load of 50-100 million gas per second (Mgas/s).



Read more from our opinion section: <a href="https://blockworks.co/news/layer-2-centralization-poses-dangers-for-blockchain">L2 centralization is a ticking time bomb for blockchain</a>



The G2 sequencer is built upon a string of technological advancements, including deep database optimizations and improvements in algorithmic efficiency, according to Andrew Huang, Conduit’s founder.



“There’s no single breakthrough,” Huang told Blockworks, “but rather a series of incremental optimizations — a 5% gain here, a 10% gain there, and over time, it compounds.” These improvements span every layer of the stack, from data access and storage to the cloud-native infrastructure orchestrating the system.



Under heavy workloads, sequencers can struggle to keep up with the head of the chain. G2 capacity opens the door for applications that were previously impossible to run fully onchain, such as Web3 games. Pirate Nation, launched by Proof of Play in December 2022, debuted on the Polygon PoS chain before later migrating to the <a href="https://blockworks.co/tag/arbitrum">Arbitrum</a> Orbit tech stack for its Apex and Boss chains.



Read more: <a href="https://blockworks.co/news/empire-newsletter-nfts-comeback-gaming">A wave of new games could prove NFTs aren’t dead after all</a>



“As the platform grew, it required a more scalable and cost-effective solution, leading to the development of [the] Orbit chains,” a spokesperson told Blockworks.



The game is among the first projects to adopt G2. Apex and Boss are both among the top three chains by Mgas/s according to <a href="https://rollup.wtf/">rollup.wtf </a>, a Conduit-built dashboard. The Proof of Play team insists this activity represents organic usage.



“Pirate Nation makes banning bots a top priority,” the spokesperson said, adding that “the Proof of Play team has tuned the incentive structure and processes to ensure the game is being played by real people with one real account.”



With G2, the team was able to solve its <a href="https://blockworks.co/tag/scaling">scaling</a> challenge and expand capacity with additional chains as needed.



&#8220;<a href="https://blockworks.co/tag/gaming">Gaming</a> kind of pushes the limits,&#8221; said Huang. “They&#8217;re obviously the most demanding applications.” But he also flagged Gravity, a Web2 app originally known as Galxe, that has successfully migrated its entire database of 26 million active users onchain using G2. That wouldn’t have been feasible without the upgraded throughput, he said.



Read more: <a href="https://blockworks.co/news/crypto-infrastructure-bloat">Crypto’s infrastructure bloat — are we building too much?</a>



<h2 class="wp-block-heading">Mgas/s as better scaling metric</h2>



Measuring blockchain sequencer throughput by Mgas/s is supplanting the traditional transactions per second (TPS) metric when it comes to judging relative scalability. “TPS is a dead metric,” Huang said. “It tells you nothing about how much compute is actually happening onchain.”



TPS can be misleading, as eye-popping headline numbers may result from artificially maxing out bandwidth with simple token transfers rather than real-world usage.



Mgas/s, in contrast, provides a much clearer picture of <a href="https://blockworks.co/tag/rollups">rollup</a> performance, especially when considering more complex applications. It comprises several different types of workload — from compute to storage — into a single figure.



“It’s not perfect because you’re putting a <a href="https://vitalik.eth.limo/general/2024/05/09/multidim.html">multidimensional thing</a> into a single metric, but it’s much better,” Huang said.



While current public benchmarks remain limited, this is just the beginning, according to Huang. The G2 team is already working toward gigagas levels of throughput, or 1000 Mgas/s. That’s also the goal for <a href="https://blockworks.co/tag/base">Base</a>, the Ethereum layer-2 rollup built on <a href="https://blockworks.co/tag/optimism">Optimism’s</a> OP Stack. Jesse Pollack outlined a plan to incrementally raise Base’s throughput over the coming year to its gigagas target on a recent <a href="https://blockworks.co/podcast/0xresearch/94d4f7bc-75e9-11ef-98bf-b7288c1f796c">0xResearch podcast</a>.&nbsp;



For comparison, Ethereum’s mainnet processes about 1-1.5 Mgas/s.



The move towards Ggas throughput is expected to open up possibilities for still more computationally intensive dapps, such as social networks, prediction markets and high-frequency trading systems which require substantial performance headroom.



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Conduit sees path to gigagas throughput with new sequencer

Donovan Choy

Today, enjoy the 0xResearch newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox. <a href="https://blockworks.co/newsletter/research">Subscribe to the 0xResearch newsletter</a>. 



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<h2 class="wp-block-heading">New tech for cross-chain interoperability</h2>



Several teams are making strides to enhance the crypto developer experience, offering advanced tech stacks with the ultimate goal of simplifying the onboarding experience for new users.



OKX has launched <a href="https://www.okx.com/web3/build/docs/waas/okx-waas-what-is-waas">OKX OS</a>, an open-source infrastructure suite of tools, SDKs and APIs needed to build applications across a wide range of blockchains, including Ethereum, Bitcoin and Solana.



This new stack allows developers to leverage the same technology that powers the OKX Wallet, and aims to simplify and scale development for 100+ chains, the company announced Monday.



Another new path toward an omnichain user experience is Axelar’s Mobius Development Stack (MDS).



The tech stack, unveiled today, is offered as vendor-agnostic architecture integrated into popular OpenZeppelin libraries.



Axelar’s MDS also marks the mainnet debut of its <a href="https://blockworks.co/news/axelar-interchain-amplifier-liquidity-flow">Interchain Amplifier</a> for permissionless cross-chain connections at the smart-contract layer. The Interchain Amplifier is secured by staked AXL, or restaked assets like ether and bitcoin.



This approach places cross-chain interoperability front and center, spanning diverse L1s including Solana, Stellar and XRP Ledger — without requiring bridges. But it also offers a way to connect off-chain resources, like zk or AI co-processors.



Features such as the Interchain Token Service (ITS) facilitate native cross-chain tokens, with use cases such as tokenizing real-world assets, enhancing liquidity and enabling fractional ownership across different chains.



According to Axelar co-founder Georgios Vlachos, MDS is “empowering developers to build decentralized applications that compose resources, logic, value and network effects freely across a truly global internet landscape.”



OKX and Axelar’s recent launches tie into a broader trend in the Web3 space around improving developer experiences and user onboarding through enhanced infrastructure.&nbsp;



W3.io, launched in September, is building the Orchestration Cloud, an industry utility that aims to bring the benefits of an orchestration layer — long proven in Web2 environments — into Web3.



Backed by an impressive cadre of crypto builders, W3 functions like an advanced oracle and is designed to string together multiple services to support complex transactions across Web3.



Similar to Axelar’s MDS, W3 also looks to enable developers to build applications that not only function efficiently across blockchains but also integrate off-chain resources.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcToQY7_SakDzRyUKygy3d_AQijjwiL6esFBGyQJ57Xkq5oiN36qtvXxjZwiTAJEmPNpgy_1NEtclysGh4TvyQQZNXDD0vyNON_W1qNLYE77lAv4i38DZvER8o8z8Y8aT1PVIN83oA9TAXyHguKu0W1WJo?key=Fg21ruo8oQ1_UB1OqbE92Q" alt=""/></figure>



W3.io can simplify the process of coordinating multiple actions, according to Scott Dykstra, co-founder and CTO at Space and Time.



“The challenge that developers have right now is stringing together a bunch of different services to accomplish very complex onchain tasks,” Dykstra told Blockworks.



For example, it could help a game manage steps such as tracking player achievements, minting NFTs and updating the game server with new data. W3.io acts as middleware that connects off-chain and onchain actions seamlessly.



Together, these technologies point to the creation of a holistic ecosystem where developers can build decentralized applications that are interoperable, scalable and easier to use across the entire Web3 space.



— Macauley Peterson



<h2 class="wp-block-heading">Chart of the Day</h2>



Base increases gas limits:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXea8tr69lP15mz3TFA5mEbokMlkeyL2I98nJadL-FUGz8gKZ_aDW-Pxx0d2Q0RPp6HujPaCMkVjW9JrUUvav16lFCnp0bCsKTSjoSipY6UbhY8fHrP3IBOprgzaTqonOaT_Rzaoa7gkz5lss1-VsfHxE7c?key=Fg21ruo8oQ1_UB1OqbE92Q" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://x.com/base/status/1838639094995521831">Base</a></figcaption></figure>



In pursuit of scalability, Base continues to ramp up gas limits per block. 1 Megagas/s per block will be added weekly, with this week’s increment going from 11 to 12 Megagas/s. Base’s stated goal is to reach 1 Gigagas/s capacity eventually.



L2s drastically increasing gas limits have some subtle, but far-reaching implications for Ethereum’s grand roadmap. As explained on <a href="https://youtu.be/yvP39-EOADU">The Rollup podcast</a> by Justin Drake, raising gas limits reduces the baseline profitability accrued from priority transaction fees paid by users, which in turn increases the dependency on centralized sequencer profits (MEV).



Since MEV profits for L2s outweigh transaction fee profits, this may ultimately reduce the incentive for L2s to decentralize its sequencer and enter into a multichain-like shared sequencer arrangement, sometimes referred to in Ethereum research circles as “synchronized composability.”



— Donovan Choy



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OKX and Axelar launch tech development stacks

Bessie Liu

Ethereum transaction fees would be five times more expensive if not for layer-2 rollup networks like Optimism and Arbitrum.



That’s according to a recent report from blockchain infrastructure unit Chainstack. Aside from fees between 360% and 419% higher, transactions themselves would take nearly twice as long on average, Chainstack found. 



Wait times would even stretch to 114 seconds compared to a block time of about 12 seconds (the minimum wait time if transactions are sent between blocks).



Rollups are designed to solve the <a href="https://blockworks.co/news/core-dao-solve-blockchain-trilemma">blockchain trilemma</a> — a tradeoff layer-1 networks must make between security, scalability and decentralization. Blockchains can only offer two of those elements at any one time, says Ethereum co-founder Vitalik Buterin, who <a href="https://vitalik.ca/general/2021/04/07/sharding.html">popularized</a> the concept <a href="https://blog.bigchaindb.com/the-dcs-triangle-5ce0e9e0f1dc">laid</a> out in 2016.



Ethereum, for example, is built with security and decentralization in mind. But it&#8217;s not totally scalable — transaction fees generally rise alongside user activity and can grow exponentially at times of peak demand.



With rollups, Ethereum is able to offload some of the pressure. There are two popular rollup solutions today: Optimistic rollups and zero-knowledge (zk) rollups. 



<a href="https://blockworks.co/news/ethereum-optimistic-rollups">Optimistic rollups</a>, such as Arbitrum and Optimism, process transactions off-chain and then post the data of the transaction back onto Ethereum as “calldata.” ZK rollups, such as Polygon zkEVM and zkSync Era, post all data on-chain but use cryptography to validate whether transactions are accurate without revealing the information itself. 



Usage of rollups has grown considerably over the past two years, with Arbitrium and Optimism <a href="https://dune.com/blockworks_research/l2-comparison-dashboard">often</a> together handling more daily transactions than Ethereum mainnet.



“&#8230; it&#8217;s clear how roll-up transactions have gone from representing a minor fraction of the network&#8217;s activity in 2021 to playing a vital part in Ethereum&#8217;s functioning by 2023,” Chainstack wrote.



The report added that the growing number of transactions illustrated the crucial functioning of rollups to Ethereum’s overall network efficiency.&nbsp;



Although, Ethereum gas fees (currently about $1 on average) have seen a constant uptrend between 2021 and 2023 despite the popularity of rollups. But Chainstack reasoned that L2 networks have still served as a necessary and useful counterbalance. 



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Rollups saved Ethereum users a boatload of gas fees: Report

Andrew Thurman

A “routine” Binance account consolidation process sent gas fees on Ethereum soaring, prompting accusations of incompetence on Thursday.&nbsp;



At approximately 6 am ET, an address labeled Binance 14 received hundreds of incoming ether transactions. Per Etherscan, the process sent gas prices as high as 280 gwei — over twenty times more expensive than the 13 gwei at the time of writing. 



The activity briefly made the address one of the largest gas guzzlers on Ethereum, as the wallet was responsible for 83% of fees at the peak of the transfers. Top spenders tend to include the decentralized exchange Uniswap, various MEV bots, and layer-2 networks settling transactions to the base chain.


<div class="wp-block-image">
<figure class="aligncenter"><img decoding="async" src="https://lh3.googleusercontent.com/6M72JeG1TyD9gcp0l1MsumSsNMXeJ5au8t8rPiecxwBZUWlQT8ZHJLNLJH9V5qM9wllDD05AfXeccn2TgOfT2gFEH9F3gGmgR9s3c-1jx649jT9IipIFbsBnOV5Cbwm4_Gy4VpRbXvKfJ1Ucn8E53l4" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://etherscan.io/dashboards/gas-guzzler">Etherscan</a></figcaption></figure></div>


The <a href="https://etherscan.io/address/0x28c6c06298d514db089934071355e5743bf21d60#analytics-txfees">Binance 14</a> address has spent $842,000 in total gas fees on a 24-hour basis, and just $562 in the last three hours. Over the course of its existence, the address — which currently accounts for $250 million of Binance’s <a href="https://portfolio.nansen.ai/dashboard/binance">nearly</a> $56 billion in holdings — is responsible for $95 million in gas expenditure between both incoming and outgoing transfers. 



In a statement to Blockworks, a Binance spokesperson said, &#8220;Binance carried out a routine consolidation of [ether] <a href="https://blockworks.co/price/eth">ETH</a> to one of its wallets. Any impact to gas prices was unintentional but quickly resolved.&#8221;



Indeed, throughout its existence the Binance 14 address has seen a number of gas spend spikes, including one on Dec. 9, 2022 that led to an 880 ETH spend over a 24-hour period.&nbsp;



Binance was the target of ire on social media as a result of the account consolidation process, with many observers noting that if they had simply spread the transactions out over a longer period of time, the gas spike would have been significantly subdued.&nbsp;



As a result of what some <a href="https://twitter.com/SOLenjoyoor/status/1704810573928767644">labeled</a> as inefficient methodology, Binance ended up spending more on gas than they would have otherwise and made the network more expensive for others.&nbsp;



“Every interaction I have had with them screams of incompetence,” said Rotki app founder Lefteris Karapetsas of the transfers.



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Binance account consolidation sends Ethereum gas fees soaring

Sebastian Sinclair

Visa has wrapped up testing a way for users to pay on-chain gas fees directly in fiat with a credit or debit card, the payments giant said on Thursday.



The experiment, which was conducted on the Ethereum Goerli testnet, uses a paymaster contract to sponsor <a href="https://blockworks.co/tag/gas-fees">gas fees</a> on behalf of users, according to a <a href="https://usa.visa.com/solutions/crypto/paying-blockchain-gas-fees-with-card.html">statement</a>.



It means users can send blockchain transactions without having to worry about maintaining a balance of ether. Visa believes the contract could make transactions more accessible to a wider range of users.&nbsp;



&#8220;Our experiment aims to offer a promising approach to substantially addressing the challenges of blockchain-based transactions,&#8221; Visa’s technical team wrote. &#8220;By leveraging the innovative concept of a paymaster, in conjunction with account abstraction and the ERC-4337 standard, we explored the potential for a process that could redefine blockchain-based transactions.&#8221;



A paymaster contract is a specialized type of smart contract within the blockchain ecosystem, designed to manage the payment of gas fees.&nbsp;



The company said merchants or decentralized applications (dapps) could run their own paymaster solution, or existing wallet and paymaster service providers could offer a card-based gas fee payment choice alongside their other paymaster offerings.



The experiment is part of Visa&#8217;s <a href="https://blockworks.co/news/visa-reaffirms-crypto-strategy-mastercard-touts-blockchain">ongoing development</a> within the industry. The company has been working on ways to make blockchain payments more user-friendly and accessible.



Visa reportedly began experimenting with converting digital assets into fiat payments on the Ethereum blockchain <a href="https://blockworks.co/news/visa-eyes-high-value-usdc-settlement-payments-on-ethereum">earlier this year</a>. The aim is to parallel its current foreign currency exchange processes, as part of its broader push to build proficiency in global settlements involving both digital and traditional currencies.



In the context of transactions on blockchains like Ethereum, every operation conducted incurs a cost known as a &#8220;gas&#8221; fee, representing the computational effort required to execute the operation. Gas fees help keep the Ethereum network secure by making it costly for bad actors to spam the network.



Since inception, network fees have been a fundamental part of ensuring security and encouraging adoption within first-generation blockchain systems. Though, following ten years of user growth, the hope is the trajectory of Web3 will move towards a <a href="https://blockworks.co/news/the-future-of-web3-needs-zero-gas-fees">&#8220;gasless&#8221; future</a>.



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Ethereum gas fees? Charge it, please! Visa proposes to let you pay with card

Ethereum gas prices spiked up to 77 gwei yesterday as users rushed to mint VMPX tokens, a project launched via XEN.



XEN is an ERC-20 — the standard for smart contract tokens on Ethereum — and is created through “proof of participation” where users must connect their wallet and express how long they are willing to wait to receive the token.



The value of XEN — or any other token that uses its smart contract to launch — is correlated to the number of people who want that specific token, as described in XEN’s <a href="https://faircrypto.org/xencryptolp.pdf">white paper</a>.



Users do not need to lock in any assets to mint the token and simply need to pay the transaction fee. Essentially, these tokens are designed to maximize block space and increase gas prices. They do not appear to have inherent value unless there is demand.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">from the fake guy&#39;s twitter, it looks like its being monitored who spends the most, and they will get another airdrop on <a href="https://twitter.com/hashtag/XEN?src=hash&amp;ref_src=twsrc%5Etfw">#XEN</a> or something? made no sense when i dove into it this morning. gas-used was 20mil or 2/3 of an ethereum block to max mint due to their POW process&mdash; specialedge#0001 (🦇🔊,🍔) (@specialedge_eth) <a href="https://twitter.com/specialedge_eth/status/1676716785209409536?ref_src=twsrc%5Etfw">July 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



One particular user paid up to <a href="https://twitter.com/EigenPhi/status/1676756105362391042/photo/1">1.3 ETH (almost $2,500)</a> in gas fees to mint the VMPX token. It is unclear how much profit, if any, the user made from selling the token.



Pseudonymous twitter user zilbaghodler <a href="https://twitter.com/zilbaghodler/status/1676712795952549890">noted</a> that “they are selling straight into the LP [liquidity pool] and making around $40 per $2300 they spend.”



This type of behavior significantly drives up <a href="https://etherscan.io/gastracker#historicaldata">gas prices</a> for regular traders and can hinder mainstream adoption of blockchain technology.



“There is no trivial way to stop this,” software engineer and cryptocurrency trader Eric Wall <a href="https://twitter.com/ercwl/status/1653508862631084036">tweeted</a> in May. “The way you limit ‘bloat’ is by setting block size / gas limits at the consensus level.”



Although it is an uncommon case, Wall notes that these type of challenges will continue to arise as Ethereum scales



“They push us to make sure we have [layer-2] solutions in place and wallet infrastructure that can accommodate it,” Wall <a href="https://twitter.com/ercwl/status/1653508862631084036">wrote</a>. “It&#8217;s a stress test. It&#8217;s good and you should stop crying about it.”



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‘Stop crying about it’: Exorbitant ETH gas fees are just another stress test

It has been a week since Optimism’s Bedrock release, and the layer two scaling solution has already seen positive results.



One particular area that has gained attention is the significantly lower gas costs.&nbsp;



At a glance, average gas fees per transaction, payable in USD and ETH have decreased by <a href="https://dune.com/oplabspbc/optimism-bedrock-migration-impact-dashboard">74.5%</a> and <a href="https://dune.com/oplabspbc/optimism-bedrock-migration-impact-dashboard">73.9%</a> respectively.&nbsp;



The cost to Optimism users for data storage on Ethereum mainnet have also decreased by over <a href="https://dune.com/oplabspbc/optimism-bedrock-migration-impact-dashboard" target="_blank" rel="noreferrer noopener">55%</a>.



Fees to send ETH on Optimism are now less than that of <a href="https://l2fees.info/" target="_blank" rel="noreferrer noopener">Starknet </a>but still higher than Arbitrum One and zkRollup technologies Polygon zkEVM and zkSync Era. 



Though this is the case, the cost to <a href="https://l2fees.info/" target="_blank" rel="noreferrer noopener">swap tokens</a> on Optimism is lower than that of the two popular zkRollups, but still slightly higher than Arbitrum.



<h2 class="wp-block-heading">Plans to go interchain</h2>



A huge part of the Bedrock upgrade was to prepare Optimism for a <a href="https://blockworks.co/news/optimism-bedrock-upgrade-superchain">Superchain future</a>.



“It’s the one upgrade we’ve been really looking forward to taking off and laying the foundation,” Head of DeFi at Optimism Labs Smit Vachhani said in a <a href="https://twitter.com/axelarcore/status/1668291674601140228?s=20" target="_blank" rel="noreferrer noopener">Twitter spaces.</a> “It begins the modular rollup paradigm for us…we’re going deeper into that world of re-using the technology that is modular, flexible, reusable and future-proof.”



Vachhani notes that there will be a larger roadmap coming out in the following weeks related to moving into the interchain world.



“I think we’ve been thinking about things [as] very chain specific, but if you remove core parts of infrastructure from the realm of tech dev, developers start tinkering with the apps more and start tinkering with the tech more, and I’m excited about what comes out of that,” he said.&nbsp;



Optimism will be taking time to look to understand what users and developers need and then determine the next action steps, Vachhani said.



“We understand that teams have been building interoperability for a long time and there’s a lot to be gained from working with those teams, so in an ideal world I would love the collaboration route rather than the competition route,” he said.



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Optimism sees reduced gas fees following Bedrock

Decentralized cryptocurrency exchange Uniswap has lifted the curtain on its protocol’s fourth iteration.&nbsp;



Uniswap Labs, the team behind the protocol, has released a draft code, looking for community contributions to build out <a href="https://blockworks.co/tag/uniswap" target="_blank" rel="noreferrer noopener">Uniswap</a> v4.



Like Uniswap v3, the latest version of the protocol will be under business source license 1.1, meaning its code can not be forked or copied for commercial use over the next four years, with it then converting to a GPL license.&nbsp;



Exceptions must be approved by Uniswap Governance, voters using UNI tokens, that oversees the protocol, or be granted special exceptions by developers at Uniswap Labs.



<h2 class="wp-block-heading">Creating custom pools through “hooks”</h2>



Uniswap v4 code will be entirely open-sourced and introduce what the team calls “hooks.”&nbsp;



In an interview with Blockworks, Sara Reynolds, protocol engineer at Uniswap Labs, said hooks are smart contracts that can be plugged into different pools.



“They are able to interact and build on top of these custom pools,” Reynolds said. “We have some ideas around what hooks might look like and how people can use different kinds of custom pools, but a lot of it is still unknown and we’re excited to see what the community is going to build with hooks.”



An example of a type of functionality that hooks can introduce: acting as a time-weighted average market maker (TWAMM).



“It’s going to let users execute what we call the long term swap, or long term order,” Reynolds said. “You could swap USDC, or something like that, over a long period of time. This is cool for the use case of doing something like dollar cost averaging, where [over a set time period] you want to swap into a token.”



But such functionalities will not be introduced as part of the architecture. They’re rather something developers can build on top of the architecture itself through “hooks.”



<h2 class="wp-block-heading">What’s different about the actual architecture?</h2>



Alongside the introduction of “hooks” the latest Uniswap v4 architecture will ensure that its pools all live within one single smart contract, or what the team calls a “singleton contract”.



Tokens will be transferred between one single smart contract, rather than between individual pools held in different smart contracts, which ought to cut down on gas fees.



It is estimated the new architectural design will reduce pool creation gas prices by over 99% in comparison to v3.&nbsp;



Singleton architecture will also be accompanied by “flash accounting,” Reynolds said.



Only net balances will be transferred in and out of pools — rather than having entire balances be transferred at the end of every swap.



“This is basically just a more efficient way to leverage the liquidity across all of these now different kinds of varying Uniswap pools,” she said.



No date has been set for deployment of v4, as Uniswap Labs anticipates feedback from the Uniswap community before determining its next course of action.



&#8220;We are releasing the draft code now so that v4 can be built in public, with open feedback and meaningful community contribution,&#8221; Uniswap founder Hayden Adams said in <a href="https://blog.uniswap.org/uniswap-v4" target="_blank" rel="noreferrer noopener">a blog post</a>. &#8220;We expect this will be a months-long process.&#8221;



Uniswap v3 was <a href="https://blog.uniswap.org/uniswap-v3" target="_blank" rel="noreferrer noopener">announced</a> in March 2021 and deployed to Ethereum mainnet in May 2021.



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What has Uniswap Labs cooked up for v4?

An Ethereum Improvement Proposal, dubbed EIP-6969, is looking to implement Contract-Secured Revenue (CSR) on <a href="https://blockworks.co/tag/ethereum">Ethereum</a> L2s.



CSR refers to a series of smart contracts that enable developers to earn revenue whenever others interact with the code they have deployed on-chain.



Kevin Owocki, one of the co-authors of EIP-6969, told Blockworks that his firsthand experience as a builder in the Web3 space made him aware of the difficulties involved in monetizing the products he had actively helped create.



“There are really not that many opportunities to monetize in a way that&#8217;s sustainable and not very speculative,” Owocki said.&nbsp;



After learning about CSRs from the <a href="https://www.blockworksresearch.com/research/canto-defi-as-a-public-good">Canto Layer 1 network</a>, a permissionless general-purpose blockchain, Owocki saw an opportunity to reward developers for their efforts sustainably and wanted to bring this idea into the EVM ecosystem.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">EIP-6969 presents a generalized protocol which networks can reference in order to implement Canto’s Contract Secured Revenue (CSR) on any EVM L2. Contract Secured Revenue = developers get revenue when ppl use their contracts .<a href="https://t.co/nxdgypdgDw">https://t.co/nxdgypdgDw</a>&mdash; Owocki.Ξth (🍄,💚) (@owocki) <a href="https://twitter.com/owocki/status/1655631005800095763?ref_src=twsrc%5Etfw">May 8, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h2 class="wp-block-heading">Bringing activity to L2s and revenue to developers</h2>



On Ethereum Layer 2 solutions today, every transaction that calls a contract on the network sends a portion of the gas consumed to the sequencer as a fee.



EIP-6969 modifies this slightly by sending a portion of those gas fees to the developer of that smart contract as well.



“When you deploy a contract onto the Ethereum network, the address you deployed that contract with would be attached to the contract,” Owocki said. “However much execution time EVM spends inside of your smart contract, that’ll be mapped proportionally and a percentage of the fee revenue will return to that address.”



Owocki notes that this new approach offers an opportunity to bridge the gap between Layer 2 solutions in need of more developers, and developers who are seeking avenues for generating revenue.



<h2 class="wp-block-heading">The modular architecture of smart contracts on Ethereum&nbsp;</h2>



As Ethereum smart contracts are designed with composability in mind, Owocki believes that EIP-6969 could set up a strong foundation for the evolving open-source infrastructure that can expand the Ethereum ecosystem.



“We have all these open-source lego bricks that exist in the Ethereum ecosystem, I as a hacker could walk into a hackathon and build something in a weekend that would have taken a bank 15 years ago $100 million to build because I can get so much software off the shelf,” he said. “So with EIP-6969, we really wanted to respect that modular architecture of the EVM.”



This means that revenue will not just be given to a smart contract at the top execution level, but as you go down the stack, each contractor that has contributed to modifying the code will be given a portion of the revenue.



“What this does is it incentivizes the creation of infrastructure, because people who might not have a business model right now are all of a sudden going to get more and more revenue as more people use their deployed version of [the smart contract],” he said.



Every time an infrastructure is used, the gas fee trickles down to everyone who had participated in building the infrastructure, creating a reward loop that incentivizes more people to maintain open-source infrastructure.



<h2 class="wp-block-heading">Timelines and execution</h2>



CSR currently exists in the Canto ecosystem, Owocki notes. In the EVM ecosystem, the next step will be to wait for the EIP to be accepted by the community so that the development team can create a canonical spec for how it would operate in the Ethereum ecosystem.



Once that is complete, Owocki said that the next step would be to work with L2s to implement it into their ecosystems. This is expected to happen within the next six months.



“The reason why we can move faster on this is because we&#8217;re deploying it to layer twos,” he notes. “This is not a specification that is meant for the Ethereum mainnet. Ethereum mainnet needs to be credibly neutral, and it needs to be capture resistant. I think it&#8217;s very important to prototype this on layer twos where the stakes are lower.”



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This Ethereum Proposal Wants to Bring Revenue Back to Developers

John Lee Quigley

<div id="highlights-block_63409483134f2" class="highlights">
 <ul>
 <li>SKALE is unique from all other scaling solutions because it is able to deliver zero gas fees</li>
 <li>Running a dedicated chain for different use cases and applications enables infinite scalability</li>
 </ul>
 
</div>



First-generation blockchain networks relied heavily on network fees to provide security and incentivize adoption. However, a decade of massive user adoption makes it evident that the future of Web3 will be “gasless.”&nbsp;



The current Web3 business models of metaverse gaming, NFT collectibles and creator-first content platforms will struggle to scale to billions of users if they require users to pay fees for each transaction. In sharp contrast, a zero gas fee model delivers a frictionless experience to Web3 users and is already a reality for blockchain developers and users on the SKALE Network.&nbsp;



Before diving deeper into the concept of zero gas fees, this piece will clear common misconceptions surrounding the recent <a href="https://cms.blockworks.co/the-investors-guide-to-the-ethereum-merge/" target="_blank" rel="noreferrer noopener">Ethereum Merge</a>. The landmark event is the first step in a long list of Ethereum scaling upgrades that will drive fees toward zero on the execution layer.&nbsp;



<h3 class="wp-block-heading">Misconceptions about Ethereum&#8217;s scaling upgrades&nbsp;</h3>



<ol class="wp-block-list"><li>The Merge will reduce Ethereum gas fees</li></ol>



According to Ethereum founder Vitalik Buterin, <a href="https://www.youtube.com/watch?v=kGjFTzRTH3Q" target="_blank" rel="noreferrer noopener">the roadmap</a> to low gas fees on Ethereum comes in five different phases: The Merge, The Surge, The Verge, The Purge and The Splurge. The Merge does not have any notable impact on Ethereum’s network performance. Instead, it lays the foundation for implementing several scalability and performance-focused upgrades.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/PhkHyMJ9e7um_IHwoLHLS4fdIeX4_URxuNIgG-_npZqVZ8adnAswwRCCYLDBCuAc09v7yHTmxN97dw8vYOvcHhTjakjZrrd8kTxzvph_HYZowrpdx76hhoHILpBprfZbsOjeXmOD8VhSsLoFkGgJteBiCcfQ4f3yDjr0NuM4LhbjT6TCtMrd5h-jdQ" alt=""/><figcaption>Source: <a href="https://twitter.com/VitalikButerin/status/1466411377107558402">Vitalik Buterin on Twitter</a></figcaption></figure>



The Surge, the next in line in a post-Merge era, will reduce Ethereum network congestion and lower gas fees. The Surge will see the <a href="https://ethereum.org/en/upgrades/sharding/" target="_blank" rel="noreferrer noopener">introduction of sharding</a>&nbsp;— a scalability approach that splits the Ethereum network into smaller interconnected chains that offer higher throughput and low block times.&nbsp;



The Surge will also support the creation of rollups — layer-2 solutions that process transactions on their native chains before settling them on the more secure Ethereum network. While the move to proof-of-stake is an important milestone, it is not until developers implement The Surge sometime between <a href="https://ethereum.org/en/upgrades/sharding/" target="_blank" rel="noreferrer noopener">2023-2024</a> that Ethereum can theoretically offer lower gas fees and process more transactions per second.



<ol class="wp-block-list" start="2"><li>The Surge will eliminate the need for layer-2 solutions</li></ol>



The Surge will make layer-2 solutions more robust rather than eliminate them. Current layer-2 solutions, including rollups, are limited by the burden of handling large amounts of data. A sharded network shares the data handling load and allows rollups to scale up to 100,000 transactions per second.



A typical roll-up solution bundles several transactions executed on its native chain into one, which is submitted on the Ethereum mainnet. This “bundling” process reduces the amount of data required to process the transaction on Ethereum and frees up more blockspace.



Layer-2 solutions will see greater adoption as Ethereum moves from the monolithic blockchain model to a modular one. These solutions on different chains will offer cheap and fast transactions that derive their security from Ethereum’s main layer. However, the long-term roadmap indicates that rollups alone are not enough to scale throughput on Ethereum.&nbsp;



<ol class="wp-block-list" start="3"><li>Rollups are the only L2 solution needed to scale</li></ol>



Although rollups are an integral piece of the scaling solution puzzle, they are only ideal for transactions and applications that require limited computational power. They cannot simultaneously power several Web3 applications handling millions of transactions per minute.



In a theoretical scenario, rollups can only allow developers to bundle transactions that initially cost $1,000 in fees to as low as $200. Yet, even such significant cost savings amount to millions for a platform that plans to scale to the millions of users served by most Web2 apps.



The optimum approach to scaling the Web3 economy is a zero gas fee environment where users do not pay a fractional fee for every transaction. Achieving such scale using highly interoperable blockchains takes Web3 to the cusp of mainstream adoption.&nbsp;



<h3 class="wp-block-heading">SKALE’s modular approach to scaling&nbsp;</h3>



SKALE is pioneering a new modular approach to scaling Ethereum. Current L2 solutions, including rollups, utilize a monolithic system where developers must build applications on a single network, inheriting the same flaw of the native Ethereum network.



SKALE truly scales through interconnected blockchains called SKALE Chains, created and managed by independent dapp developers to suit their specific needs. Running a dedicated chain for different use cases and applications enables infinite scalability. It also allows for reliable interoperability between all SKALE Chains, reducing the friction associated with bridging assets between other networks.



Another of SKALE’s unique propositions is that it imports security from Ethereum using an elaborate consensus mechanism. SKALE validator nodes stake assets on the Ethereum mainnet, while interconnected SKALE Chains enjoy decentralization through a robust validator rotation mechanism.&nbsp;



<h3 class="wp-block-heading">How zero fees works with SKALE</h3>



What makes SKALE unique from all other scaling solutions is its <a href="https://skale.space/blog/how-does-skale-offer-zero-gas-fees" target="_blank" rel="noreferrer noopener">ability to deliver zero gas fees</a>. They adopted a model that is similar to how Web2 products subsidize hosting costs on behalf of users. Jack O’Holleran, co-founder of SKALE Labs, broke this down for us:



“SKALE, like all blockchains, has an integrated onchain payment method which pays validators to validate blocks and secure the network. Most blockchains make end users pay validators via transaction/gas fees which introduces friction and inhibits growth. SKALE, in contrast, enables the applications to pay validators directly in advance which subsidizes the gas fees for users.”



This subscription model allows the ecosystem to grow sustainably through attracting projects with viable business models and real world applications.



<h3 class="wp-block-heading">A Web3 with zero gas fees</h3>



A Web3 experience with zero gas fees has an infinite scale similar to current Web2 applications. For instance, a Web3 play-to-earn game charging fees per transaction cannot scale to the size of the popular gaming title PUBG, which has over a billion players. The same limitation applies to on-chain dexes that support limit order books and must handle hundreds of thousands of transactions per second to enable a frictionless experience.



Blockchain development teams are tapping SKALE Network to build dapps immune to the limitations of network fees. For instance, <a href="https://ruby.exchange/" target="_blank" rel="noreferrer noopener">Ruby Exchange</a> is a SKALE-based decentralized exchange that enables users to boost yield and reduce fees through holding NFTs. Another team plans to launch SKALE’s first NFT marketplace called <a href="https://nftrade.com/" target="_blank" rel="noreferrer noopener">NFTrade</a>. It will be hosted on the NFT community hub chain <a href="https://skale.space/blog/announcing-the-calypso-nft-hub" target="_blank" rel="noreferrer noopener">Calypso</a> and its estimated release date is sometime in Q4. Additionally, the development team behind <a href="https://exorde.network/" target="_blank" rel="noreferrer noopener">Exorde</a> created a Web3 protocol that empowers developers to crawl and link all public data on the web.&nbsp;



With a total of 20 SKALE chains and over 10 million transactions, users have saved <a href="https://skale.space/stats" target="_blank" rel="noreferrer noopener">32,351 ether</a> in gas fees to date. As of publication, that equates to $53,074,446 in savings. SKALE&#8217;s high performance and gasless experience continues to attract more Web3 gaming projects such as <a href="https://blockbrawlers.com/" target="_blank" rel="noreferrer noopener">Block Brawlers</a>, <a href="https://cryptocolosseum.com/" target="_blank" rel="noreferrer noopener">Crypto Colosseum</a> and <a href="https://www.cryptoblades.io/" target="_blank" rel="noreferrer noopener">CryptoBlades</a> into its ecosystem.&nbsp;



The future Web3 economy will require blockchain networks that offer frictionless experiences. In such an economy, users can freely roam applications without paying a fractional fee for each transaction.



Developers can deploy applications confident that the underlying network is robust enough to support infinite scalability. SKALE is built to deliver such a fluid network performance and will almost certainly gain further traction as the journey to scaling Ethereum enters its next phase.



This content is sponsored by <a href="https://skale.space" target="_blank" rel="noreferrer noopener">SKALE</a>.



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The Future of Web3 Needs Zero Gas Fees

Jack Kubinec

<div id="highlights-block_62e96a78ca5fb" class="highlights">
 <ul>
 <li>ETH transaction fees increase when price and transaction demand increase</li>
 <li>“Layer-2s are just a band-aid” for higher ETH gas fees, an industry CEO said</li>
 </ul>
 
</div>



Even if Ethereum flawlessly executes its upcoming software upgrade, the protocol will still need to address its nagging problem with transaction fees.



Despite reaching a multi-year low, <a href="https://bitinfocharts.com/comparison/transactionfees-btc-eth-zec.html#3y" target="_blank" rel="noreferrer noopener">Ethereum’s transaction fees</a> — known as gas fees in the Ethereum community — are still double those of Bitcoin and magnitudes more than the fees charged by competitors such as Solana.



In the complex world of Ethereum upgrades, the “Surge,” which will increase the blockchain’s scalability and lower gas fees, is at times conflated with <a href="https://cms.blockworks.co/the-investors-guide-to-the-ethereum-merge/" target="_blank" rel="noreferrer noopener">the Merge</a>, which will make Ethereum more energy efficient but will do little to control transaction costs.



The upcoming September Merge — the title given to Ethereum’s upcoming switch to a consensus mechanism powered by <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/" target="_blank" rel="noreferrer noopener">proof-of-stake</a> — will rely on layer-2s to soak up users switching chains and curb gas fees. Ethereum’s more permanent update to lower gas fees will release next year at the earliest.



Ethereum’s gas fees incentivize validators to operate nodes and keep the blockchain live. Under a proof-of-work system, gas fees are paid to miners for processing transactions. In the forthcoming proof-of-stake system, gas fees will go to stakers for lending their ether (ETH) to the protocol.&nbsp;



The protocol’s gas fees vary based on the price of ETH and the number of transactions being processed on the network.&nbsp;



Gas fees tend to move in the same direction as ETH’s price, meaning that fees declined in 2022 — a small consolation to ETH holders.&nbsp;



The magnitude of gas fee changes depend on factors beyond price, though. The recent gas fee decline has outpaced ETH’s price slip in part because the <a href="https://cms.blockworks.co/nft-floor-prices-drop/" target="_blank" rel="noreferrer noopener">cratering NFT market</a> reduced demand for Ethereum settlement.



<h3 class="wp-block-heading">Layer-2s keep gas fees in check</h3>



For now, Ethereum is patching its gas fee problem with layer-2 rollups that compress transactions into batches before sending them to the pricey main layer. In practice, layer-2s such as Optimism and Arbitrum help lower the user-borne cost of Ethereum-based transactions.



“Layer-2s are just a band-aid for higher gas fees,” <a href="https://www.linkedin.com/in/1howardwu/" target="_blank" rel="noreferrer noopener">Howard Wu</a>, CEO of Aleo, said. “They’re only as scalable as Ethereum’s throughput allows.”



Ethereum hopes to permanently lower gas fees on its main layer after the Merge through sharding, which would split the network into smaller pieces and distribute data settlement more efficiently. The Surge, as the transition to sharding is known, is slated to happen sometime in 2023, though that may be an optimistic estimate — the Merge has been delayed <a href="https://news.coincu.com/98140-ethereum-breaks-promise-the-merge-delayed/" target="_blank" rel="noreferrer noopener">six times since 2017</a>.



Gas fees appear to create room for more efficient layer-1s running smart contracts to steal market share from Ethereum, but <a href="https://www.linkedin.com/in/steven-paterson-10a1619/?originalSubdomain=uk" target="_blank" rel="noreferrer noopener">Steven Paterson</a>, CEO of crypto fund Margin Syndicate, does not believe Ethereum has reason to worry.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“People have gone on a limb and said, ‘Hey we’re going to build this more efficient blockchain,’ but it just doesn’t accrue value like Ethereum has,” Paterson told Blockworks.</blockquote>



Ethereum is betting the Merge will deflate token supply and drive up price. If ETH’s price rises while network demand surges once the proof-of-stake Beacon Chain takes over the network&#8217;s economic activity, Ethereum may experience swiftly rising gas fees and disgruntled investors.



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The Merge Will Not Lower Ethereum Transaction Fees

Sam Reynolds

<div id="highlights-block_6140a897fdde5" class="highlights">
 <ul>
 <li>The Ethereum network continues to be strained under pressure from the growing NFT market and the established DeFi industry</li>
 <li>Immutable aims to expand its global engineering and sales team, and strengthen key partnerships with gaming companies</li>
 </ul>
 
</div>



As transaction fees for NFTs grow to new heights because of the strained Ethereum network, layer-2 solution Immutable announced today that it had closed a $60 million Series B round led by some of the biggest names in crypto infrastructure investment. According to a release from the company, the Series B round was co-led by BITKRAFT Ventures and King River Capital, with participation from Prosus Ventures, Galaxy Interactive, Fabric Ventures, Alameda Research, AirTree Ventures, Reinventure, Apex Capital, and VaynerFund. Immutable says this round will be primarily used to expand its global engineering and sales team, and strengthen key partnerships with gaming companies.



This brings Immutable’s total funds raised to $77.5 million. The company <a href="https://www.businesswire.com/news/home/20190923005249/en/Immutable-Raises-15-Million-in-Series-A-Funding-from-Naspers-Ventures-and-Galaxy-Digital-EOS-VC-Fund" target="_blank" rel="noreferrer noopener">closed its Series A</a> round in late 2019, raising $15 million in a round led by Naspers and Galaxy Digital.



“NFT trading is a terrible mainstream user experience right now. It’s expensive, illiquid, and the only existing scaling solutions compromise on the most important thing — the security and user-base of Ethereum. We want businesses to create their game, marketplace, or NFT application within hours via APIs, with a mainstream user experience. No blockchain programming required,” said Robbie Ferguson, co-founder at Immutable, in the release.&nbsp;&nbsp;



Layer-2 solutions are a way to take some of the pressure off of the Ethereum blockchain by moving execution outside the main Ethereum chain while keeping transaction data on-chain. This allows applications to keep the security-by-consensus of the Ethereum chain but significantly, if not eliminate, transaction fees.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="409" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg" alt="Gas fees" class="wp-image-7887" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-14-gasnow-1024x409.jpg?w=1064 1064w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Historical gas price (in Gwei) since September 8; Source: gasnow.org</figcaption></figure>



According to PumpMyGas.xyz, a tracker of gas fees for Ethereum NFTs, the gas cost for sellers on many of the largest NFT markets is now over $100 on top of gas costs for buyers which can range from $13 to $70. This creates a liquidity challenge for the industry, and prevents a low-cost NFT market from emerging. 



On the Ethereum network itself, the average transaction fee reached an all-time high of $70 earlier this year as NFT mania hit full-swing, according to <a href="https://bitinfocharts.com/comparison/ethereum-transactionfees.html#6m" target="_blank" rel="noreferrer noopener">bitInfocharts</a>, and is now at around $22, down from $60 earlier this month.



According to <a href="https://etherscan.io/gasTracker" target="_blank" rel="noreferrer noopener">Etherscan</a>, NFT marketplace OpenSea was the top “Gas Guzzler”, using $2.4 million in fees during the last 24 hours. 



The price of Ethereum is <a href="https://www.coingecko.com/en/coins/ethereum" target="_blank" rel="noreferrer noopener">currently at $3,360</a>, down 1% in the last 24 hours. 



Are you a UK or EU reader that can&#8217;t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.