Vitalik Puts Forward new EIP
Vitalik Buterin (Ethereum co-founder) and Ansgar Dietrichs (Ethereum software developer) have put forward a new Ethereum Improvement Proposal, EIP-4488, that aims to temper the network’s high gas fees. (Viewable on the EIP GitHub repository)
Since Ethereum can only process 15 transactions per second, gas fees tend to spike at times of network congestion. The average transaction fee reached $73 AUD per transaction as recently as November 30.
Source: BitInfoCharts.com
This proposal aims to lower gas fees for Ethereum Layer-2 scaling solutions by adding a limit on total transaction calldata and reducing gas costs by up to ~5x. EIP-4488 will serve as a short-term remedy to high gas costs (possibly as early as Christmas, according to zkSync, itself a Layer 2 scaling protocol) while more robust solutions are developed.
This is a much-needed change since even though fees for Ethereum’s Layer-2 solutions are cheaper than those in its base layer (Optimism and Arbitrum are 3-8x lower, while ZK-Rollups are up to 100x lower), they are by no means trivial and still too expensive for many. Buterin also prefaces that EIP-4888 will lower gas fees without compromising the stability of the network, something that was not feasible before.
“Simply decreasing the calldata gas cost from 16 to 3 would increase the maximum block size to 10M bytes. This would push the Ethereum p2p [peer-to-peer] networking layer to unprecedented levels of strain and risk breaking the network; some previous live tests of ~500 kB blocks a few years ago had already taken down a few bootstrap nodes,” Buterin said.
Price increase and effect on Ethereum
The news of EIP-4488 has contributed to a drastic price increase of Ethereum, reaching almost $6900 AUD (on CoinSpot) on December 1, breaking all-time highs yet again. Just days before, ETH was only sitting at $5635 AUD.
Source: CoinSpot
This positive feedback loop echoes that of EIP-1559 several months ago, where just three days after implementation, Ethereum shot up by nearly 10% in price. Or in May, after news of institutional adoption by EIB (for digital bond issuance), Ethereum saw rapid growth from $3500 to over $5000 AUD. Another all-time high, all within two weeks.
Possible implications of EIP-4488
However, several Ethereum developers are concerned about the potential ramifications of implementing EIP-4488.
“While ostensibly simple, it could be argued that the calldata limit is an architectural decision with greater implications than just modifying a gas constant,” says Alex Krusz. “If there is an arbitrary limit imposed, why not make it a soft limit, or impose it on the entire block size rather than on calldata specifically?”
Other devs believe that the new network upgrade may cause rollup transactions to drop, leading to users paying an even higher total fee to reimburse for the lack of execution gas on transactions. “The additional constraint might require them to pay an even higher fee to outbid other rollups competing on the same calldata space.”
Tim Beiko, an Ethereum Core developer, ponders about the long term ramifications and debates whether the trade-off is worth it: “It’s literally data we add to each transaction. If we lower the gas cost, and keep the same gas limit, we then have bigger blocks, which can be problematic in the short and long term,” he says. “Long term, it increases the size of the Ethereum blockchain. If we go from adding 0.1MB of chaindata per block to even 0.5MB, that’s a 5x increase in the rate of chain growth.”
But until EIP-4488 is rolled out, it’s difficult to say how far-reaching these implications will truly be.