Scalability is one of the most important barriers to decentralized finance (DeFi) applications and creates huge barriers to entry. Closely related to this is the problem of high gas taxes, which remains a huge problem for newcomers to Web3. When Web3 becomes mainstream, those gas costs will be minimal. For the user, the work will be completely gas-free, just like in Web 2.0 applications.
As a result of the lack of scalability and network congestion, gas fees have skyrocketed, further hindering users from making various transactions on the blockchain. According to a report by YCharts, the average price of Ethereum gas is around 146 Gwei at the time of writing. The high cost of gas has become an economic nightmare for ordinary users of Web3. This led to the search for a solution that would improve the decentralized financial ecosystem and make it more convenient and accessible.
Solve the scalability problem
So the question is, what steps can we take to reduce gas taxes? While there are a number of strategies that can be used to reduce and reduce gas costs, most of them can be shortened to either building another Tier 1 blockchain or optimizing Ethereum. Another area that has been reported as a workaround for this issue is layer two scaling solutions.
Related: Even with the launch of Ethereum 2.0, L2 scaling remains key to the future of Defi.
Level 2 refers to a network or technology that runs on top of the underlying blockchain protocol to increase scalability and efficiency. These two layers use mathematics and cryptography to securely verify transactions without sending too much information to the blockchain. It’s like combining a thousand transactions for one price without sacrificing (too much) security. There are a number of Layer 2 protocols that allow Ethereum users to keep their fees to a minimum. Some examples include zero-knowledge interviews, optimistic resumes, and plasmapheres, among others. Each one comes with different considerations. Some are faster than others, and some are more secure than others.
Gas taxes will be a thing of the past
When scalability issues are resolved, gas taxes become much less important. You can see that gas taxes on L2 are much cheaper in the figures below.
Next question why does the user pay for gas at every turn? This is where gas-free meta-transactions come in. Metadata transactions take it a step further by allowing different users to make purchases on the public blockchain without transaction fees. A decentralized application developer (DApp) takes care of the slight gas on behalf of the user. This creates a smoother user experience as users do not need to understand the internal functions of various blockchain platforms and the dynamics of gas tax.
Related Topic: Ethereum Fees Are Rising, But Traders Have Options
Meta transactions use cryptography where users must sign and authenticate the transaction. The biggest difference here is that third party relay removes the complexity by managing the transaction, paying for the gas, and finally completing the transaction by sending it to the recipient’s address.
The Web3 Revolution: Solutions to Gas Problems
In addition to the solutions mentioned, there are a number of strategies that can be used to reduce or at least reduce gas costs:
Transaction timing: Ethereum gas prices are known to fluctuate throughout the day with different chains of events occurring and when different parts of the world wake up. As a result, there are certain periods of time during the day when gas prices can drop significantly. One way to reduce gas taxes is to keep track of this time and use it as a reference when making transactions. Targeted research has shown that the busiest and most expensive time is from 8:00 to 13:00 (EST), and most of Europe and the United States are up and working during this time. By comparison, midnight to 4am (EST) turns out to be less crowded and ultimately less expensive.
Use of stable off-network payment networks. The off-chain payment channel Xpal creates a payment solution that enables instant confirmation of transactions in seconds with minimal fees through the gas exchange system. This is done by charging a small fee in proportion to the payment amount.
Relay infrastructure: The future of Web3 multi-threading and without gas. Various series, Layer 2 and scaling solutions will be easily combined to provide scalability and speed. In an ideal world, the daily user would be spared the headaches associated with blockchain. They don’t need to sort through all the different threads and levels – two in order to use a DApp. It will only happen in the background.