Good Stewards - The Daily Gwei #177

Treating block-space like the precious commodity that it is.

High gas fees are obviously the bane of every Ethereum users existence over the last few months but did you know that there are some entities that use much more gas than others? As Will Price notes below, Coinbase is using about 25%(!) of all Ethereum block-space which could be reduced by 20-40% if they optimized their architecture. Before we dive into all of this, I suggest reading this piece for an overview on how gas works in Ethereum.

The concept of being a “good steward” of the blockchain has been around in the Bitcoin ecosystem for a while but it applies equally if not more to Ethereum. You see, on Bitcoin, the action that takes up block-space is BTC transfers whereas on Ethereum, it obviously goes far beyond just ETH transfers due to the use of smart contracts. These smart contracts aren’t created equal either - some of them use much more gas than others. For example, the Uniswap router contract is the top gas guzzler on Ethereum with the Tether (USDT) ERC20 contract coming in second place (I’m sure it’s obvious as to why these contracts use so much gas). On top of this, the gas a smart contract consumes varies from contract to contract as a simple token send (that uses the ERC20 contract) is a cheaper interaction to perform than a Uniswap trade.

So what does being a “good steward” of the blockchain actually mean? Well, it’s quite simple - it basically means that anyone who is using the chain in a large way (such as Coinbase) should aim to optimize their behavior/systems so that their interactions with Ethereum are as efficient as possible. This is because block-space on Ethereum is a scarce commodity and should be treated in such a way by all ecosystem participants. As Will suggests above, if Coinbase were to optimize their system they would be able to reduce their gas usage (aka block-space usage) by 20-40% which would free up this block-space for other use-cases. In addition to this, smart contract engineers can optimize their apps to be more gas efficient in a number of ways and many already do this as it helps their users as well. Finally, developers can take advantage of the layer 2 systems that already exist to “offload” some or all of the work of their app and free up layer 1 block-space for other users.

I did want to make a note here about what you’re paying for when you interact with Ethereum’s block-space and why this is so expensive. Essentially, what you are paying for is decentralization (security), extreme censorship-resistance and the ability to perform any transaction you want permissionlessly (aka without anyone’s permission). The more you centralize a system the less security and censorship resistance you will have and you risk your transaction or app being removed from the network if it is deemed “malicious” by those who control/validate the chain. This is the core reason as to why Ethereum does not want to give up decentralization for scale; if we wanted to recreate the existing centralized systems then we wouldn’t use a blockchain - we’d use AWS.

Eventually, the Ethereum main-chain (layer 1) will essentially just be an ultra-secure settlement layer for transactions such as layer 2 check-pointing and high-value transfers. End-users will mostly sit on layer 2 where they will inherit Ethereum’s security guarantees and also enjoy a fast, cheap and smooth experience when interacting with things like DeFi. This is the only way to retain Ethereum’s core properties of maximum decentralization, censorship-resistance and permissionlessness.

Have a great weekend everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.