Vitalik Buterin Suggests a Multidimensional Approach to Gas Fees

In keeping with its pioneering and progressive ethos, Ethereum has undergone a fair share of enhancements over the years in the form of regular upgrades and updates outlined in the network’s annual roadmap. The Beacon Chain upgrade, the Merge, which turned Ethereum into a Proof of Stake (PoS)-based network, Sharding, and the Shanghai upgrade are some of the most notable examples in this respect.

Each of these developments has focused on different areas of the network that required work or fine-tuning, ultimately boosting the Ethereum price prediction and helping it retain its relevance and competitive edge in an environment that keeps evolving at lightning speed. But there’s a lot more room left for improvement, as Vitalik Buterin, the mastermind behind Ethereum often points out.

In one of his latest posts, Buterin proposes some significant changes that target a key aspect of the Ethereum platform. Those of you who have bought and traded or intend to buy Ethereum might have heard of something called gas fees. The Russian-Canadian programmer envisions a different framework for Ethereum gas fees centered around a multidimensional approach that could solve the inefficiencies of the current fee system.

As expected, Buterin’s suggestion caught the attention of Ethereum supporters and the crypto community at large and sparked some interesting reactions among different groups. So, let’s see what the buzz is all about and what it might mean for Ethereum.

What are Gas Fees?

Gas is a fundamental concept in the Ethereum ecosystem which refers to the fees that users are required to pay in order to use the network’s resources and perform different actions, whether it’s running smart contracts or processing transactions.

These fees are measured in gwei – a small denomination of the blockchain’s native token Ether (ETH) and their price is not stable but fluctuates constantly based on supply and demand, and the complexity level of each transaction. When there’s a lot of activity causing congestion on the network, gas fees spike. Conversely, when the activity slows down, gas prices drop.

As the Ethereum network transitioned from the proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism, the way gas fees are earned has also changed. During Ethereum’s PoW era, gas fees were given to miners for the computational effort they expended to process transactions and secure the network. In the current PoS model, gas fees are awarded to those who stake ETH and use it as collateral to increase their chances of participating in the validation process and earning ETH.

The Issue with Ethereum Gas Fees

As you can see, gas fees are pivotal to Ethereum’s functioning; they are the fuel that puts the Ethereum machine into motion. Due to the critical role they play, gas fees have been a hot topic of debate in the crypto sphere, which often highlights their inherent shortcomings. Users have criticized gas fees for being outrageously high, especially when the network is crowded.

Another point of concern is the fact that the method that Ethereum uses to determine gas fees at the moment is unidimensional and doesn’t ensure fair pricing. In an ideal scenario, users would have to pay different fees for conducting different types of operations, based on the nature of the resources they consume. However, in practice, gas fees are not calculated on a task-by-task basis, so users pay the same amounts whether they’re using the blockchain for storage, transaction processing, or call data.

As Buterin explained, while aggregating different types of resources in the same category seamlines market operations and fee calculations, it can also hinder the blockchain’s efficiency by causing the network to erroneously reject or accept transactions. Finding a viable solution to address these issues has proven difficult, so little has been done in this respect so far. Therefore, Buterin’s recent proposal to transform the gas system and introduce a multidimensional approach provides a glimmer of hope for those impacted by Ethereum gas fees.

What would the Transition to Multidimensional Gas Fees Imply?

The idea behind multidimensional gas fees is simple: pricing different types of resources differently, in accordance with demand levels, in order to optimize costs and make the entire system more equitable for everyone.

More than a few saw a stark resemblance between Buterin’s idea and Solana’s existing fee model. Solana already employs a fee structure that allows for differential pricing. At first glance, this is exactly what Buterin is trying to do with Ethereum. But one shouldn’t be too quick to assume this is where the developer got his inspiration from. While both networks have set similar goals, they take different paths to achieving them.

While Solana calculates fees on a per-account basis, limiting the impact of gas fee volatility to individual projects, Ethereum aims to establish separate pricing by making a distinction between different categories of computational resources when establishing gas prices.

According to Buterin, the first step in this direction has already been taken with the implementation of EIP-4844, also known as Proto-Danksharding. The proposal introduced the concept of “blobs” which basically allows data rollups on layer-2 networks to be stored off-chain, thus reducing congestion and lowering transaction fees. This means blobs are priced differently than other data on the Ethereum mainnet. If this could be extended beyond layer-2 data and be applied to all other types of computational categories, Ethereum could improve its efficiency and scalability.

The Wrap-up

Revamping Ethereum gas fee system has been a long time in the making and could provide major benefits if it’s carried out successfully. However, as with all other major improvements rolled out by Ethereum so far, the journey from proposal to implementation is long and paved with numerous challenges. One should not be blinded by the potential advantages and disregard the complexities of such a critical transformation. So, it might take a while for the multidimensional fee system that Buterin envisages to materialize into a practical upgrade.