The Ethereum blockchain transaction costs are at the highest level and no one will let you forget them. Reports often describe how decentralized economic platforms are paying ever-increasing gas fees – tokens paid to miners who verify and approve transactions on the Ethereum blockchain. Yes, DeFi does play a role, but the problem is institutional.

Many exchanges, managers, and asset managers use multi-signature platforms to protect their digital assets. Several years ago, multiple signature was seen as a respectful attempt to prevent private keys from being hacked. Despite the initial implementation, many shortcomings challenged the organizations and forced them to abandon the multi-signature approach, and in many cases replace it with a multiparty computing infrastructure or MPC.

Among the many disadvantages, multi-signature platforms are not normally supported on the Ethereum blockchain. Instead, organizations should enforce smart contracts that logically execute with multiple signatures, i.e. a smart contract that accepts deposits and requires multiple signatures for termination.

Creating these smart contracts with multiple signatures to protect exchange clients’ funds requires a multi-million dollar gas bill. But it is not just people’s wallets that suffer. Because fees are denominated in Ether (ETH), a more crowded network can slow down the development of Ethereum-based projects.

A multi-user economy
Creating a multi-signature wallet in the form of a smart contract (about $ 30 in current value) costs over a million units of gas. In addition, each deposit or withdrawal costs more than 100,000 units of gas. Thus, organizations with multiple signatures end up with higher fees given that they choose to use the smart contract feature.

Unlike creating a single signature MPC wallet, there are no fees or deposits to set up the wallet, and withdrawals cost 21,000 standard petrol units.

Given that end-users pay for gasoline, any organization implementing a smart contract might initially think that this wallet creation fee is a one-time transaction. Unfortunately, there’s another big problem with multi-signature addresses on the Ethereum network that lead to another unnecessary fee: attribution.

When an organization like an exchange wants to identify deposits from different users, it creates a unique receiving address for each customer.

Unlike the Bitcoin network and other blocks, Ethereum does not allow transactions to involve multiple entries. As such, organizations will instead forward all deposits from each customer’s unique receiving address to a secure checkout address.

A common solution to obtaining addresses for organizations is to use a forwarding contract or method to redirect incoming funds to a new location (multi-signature wallet). This achieves attribution, but another smart contract must be executed.

The cost of entering into a shipment contract is approximately 200,000 gas units; The cost of filing a shipment contract is approximately 60,000 units of gas. These are all unnecessary expenses, which burden the Ethereum blockchain.

The cost of running a business?
Suppose a new crypto exchange attempts to create the Ethereum wallet infrastructure with a separate receiving address for each customer. Based on the above rates, if the switchboard uses a multi-signature infrastructure, it pays $ 6 each time it registers a new customer and creates a new pick-up address for them. This is even before the customer deposits the funds.

The exchange is more likely to view this as part of a customer’s acquisition costs or the costs of doing business (if they even know about the costs incurred, at first).

A recent report says Coinbase has 35 million customers. At current prices, creating a multi-signature infrastructure to support these clients would cost $ 245 million, regardless of whether those clients choose to conduct transactions.

As with any emerging market, organizations face increasing tax cuts over time, and companies are looking for ways to expand their businesses to a lower price without compromising security.

If organizations can reassess their core infrastructure and consider a solution that does not rely on a separate blockchain for support, they can easily reduce costs and reduce infrastructure fees. Gas payments just to reverse the infrastructure with multiple signatures for Ethereum will be a thing of the past.

The use of alternative systems will go a long way in reducing congestion on the second largest blockchain.

Source: CoinTelegraph