Key highlights:
- Vitalik Buterin still believes that layer 2 transaction fees can go down to less than $0.05 per transaction
- Metis Network, at $0.02 is the only L-2 platform that meets this ideal transaction fee at the moment
- Buterin believes that proto-danksharding can help reduce transaction costs significantly, possibly to the ideal level
- Proto-danksharding is a proposed upgrade that can improve scalability, reduce congestion, lower gas fees, and ultimately bring down transaction costs on the Ethereum Network
- Proto-danksharding is expected sometime in 2023
Vitalik Buterin, the co-founder of Ethereum, has stated that layer 2 transaction costs must be less than $0.05 to be “truly considered acceptable.” This is in spite of Layer-2s offering what most people would consider as relatively cheap transactions.
The need to reduce transaction fees on Ethereum
Buterin made the recent remarks in response to a tweet from Ryan Sean Adams, the presenter of the “Bankless” podcast. Adams had shared a screenshot, showing the average transaction costs for eight Ethereum layer-2 platforms. The data was sourced from L2fees.info, a comparison website for Ethereum’s layer 1 network and layer 2 networks built on top of it.
The Metis Network, at $0.02, is the only layer 2 that meets Buterin’s ideal transaction fee of less than $0.05. However, the transaction cost of a token swap on the platform is $0.14, which is on the high side. Fees rise drastically from there, starting at $0.12 for every transaction on Loopring and going up to $1.98 per transaction on the Aztec Network.
Coming to Ethereum’s layer-1, it is still considered reasonably inexpensive. Transaction cost stands at $3.26 per transaction while token swap costs as much as $16.31 per swap. This is expected to continue until Yuga Labs launches another collection of nonfungible tokens (NFTs), where costs can increase to $14,000 per mint.
Adams stressed the significance of layer-2s in keeping Ethereum economical, adding that “this is Ethereum, and it’s not costly.” But Buterin is suggesting that it wasn’t there yet. Replying to Adams, he wrote:
Needs to get under $0.05 to be truly acceptable imo. But we’re definitely making great progress, and even proto-danksharding may be enough to get us there for a while!
— vitalik.eth (@VitalikButerin) May 3, 2022
Buterin has held this view for a while. He originally expressed the opinion in an interview in 2017: stating that “the internet of money should not cost more than 5 cents per transaction.” Buterin claimed in January that he still believed in this goal “100%” in a lengthy Twitter thread that reiterated most of his spoken and written opinions over the last decade. In his words:
“That was the goal in 2017, and still the goal now. It’s precisely why we’re spending so much time working on scalability.”
Possible short-term gas fee reduction in the near future
In his response to Adams, Buterin referred to proto-danksharding or EIP-4844. This is a newly proposed upgrade to Ethereum that could potentially help lower transaction costs.
From what we know already, proto-danksharding will introduce “blob-carrying transactions,” a new type of transaction that carries an extra 125KB worth of data called a “blob”. A blob will not be accessible to Ethereum Virtual Machine (EVM). The idea is that this will help to improve scalability on the network in the short term, reducing congestion and competition for gas consumption, resulting in lower gas fees.
Last Month, Buterin shared some vital information about the upgrade through a blog post. He wrote:
“Because validators and clients still have to download full blob contents, data bandwidth in proto-danksharding is targeted to 1 MB per slot instead of the full 16 MB. However, there are nevertheless large scalability gains because this data is not competing with the gas usage of existing Ethereum transactions.”
Ethereum’s roadmap is well-known to be flexible. However, the shard chains upgrade is not expected until 2023. This should be well after the merging of the mainnet with the Beacon Chain.
Shard chains enable horizontal and affordable storage of data across the Ethereum network. This helps spread the load, minimizing congestion and speeding up transactions. This is predicted to have a significant impact on Ethereum and its layer 2s.
