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Founder Vitalik Buterin proposes new Ethereum network fee structure


January 7, 2022 · By MATheGooner
Ethereum (ETH)

In an attempt to enhance the present fee structure for Ethereum, Vitalik Buterin claims that computing different gas prices for varied resource utilization may streamline the current cost structure.

Image source: The Block

The proposal, dubbed “Multidimensional EIP-1559,” was detailed in a blog post published on Wednesday by Buterin, who noted that different resources in the Ethereum Virtual Machine (EVM) had varying gas use demands. 

He went on to say that the EVM has various restrictions for short-term “burst” capacity versus “continuous” capacity, mentioning block data storage, witness data storage, and block state size changes as examples.

“The scheme we have today, where all resources are combined together into a single multidimensional resource (‘gas’), does a poor job at handling these differences.”

The 27-year-old programmer proposed two possible solutions to the Ethereum blockchain network’s unsustainable gas fees. 

The first approach would divide the base price for each unit of resource by the overall base fee to get the gas cost for resources like call data and storage. The Ethereum Improvement Proposal (EIP) 1559 algorithm includes a fixed-per-block network fee called the base fee. 

The second, more complicated solution establishes a base price for consuming resources while also imposing burst restrictions on each one. In addition, there would be “priority fees,” which are calculated by multiplying the percentage by the base fee.

In August, as part of the London upgrade, EIP-1559 was deployed to burn a portion of the transaction costs in order to make gas prices more predictable. 1.36 million Ether (ETH), worth nearly $4.7 billion at current rates, has been destroyed since it went live. 

When Ethereum was first announced in 2015, the Ethereum Foundation could not have forecast the great demand for the network, and as demand grew, Ethereum’s proof-of-work (PoW) consensus algorithm became outmoded.

The network can only process roughly 13 transactions per second (TPS), falling behind competitors like Solana, which can process up to 50,000 TPS. 

According to ychart, the Ethereum ecosystem handles about 1.3 million transactions every day. The network becomes clogged as a result of a lack of throughput, resulting in highly volatile gas prices. This is a major issue for companies who have built their businesses around the blockchain. 

Consumers are migrating to other Layer-1 blockchains as a result of the network’s scaling issues and the associated unaffordable costs, indicating that users are unsatisfied with the network’s scaling issues and the resultant unaffordable fees.

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