Vitalik Buterin Proposes New Framework to Reduce ETH Fees

ETH co-founder Vitalik Buterin has released a new proposal to optimize network fees. The proposal improves on EIP-1559 and was published by Buterin in a blog on Wednesday.

According to Buterin, the proposal aims to optimize fees according to the differences between transactions. he highlighted that different resources in the ETH Virtual Machine (EVM) have different demands in terms of using gas.

The explanation is quite technical and complex, but it involves a reorganization of the network rates. Instead of unifying the rates into one, they would be organized into different classes. Each rate class, in turn, would contain different types of processes.

However, the proposal sparked controversy among miners as it would require more calculations to approve transactions. Thus, they would have additional work in approving transactions, while fees would be lower.

“The schema we have today, where all the features are combined into a single multidimensional feature (gas), does a poor job of dealing with these differences. The problem is that funneling all the different resources into one leads to very sub-optimal gas costs when those limits are misaligned,” said Buterin.

Variable rates

Buterin described his proposed changes quite complicated with a lot of technical math, but in a nutshell, the proposal offered two potential solutions using “multidimensional” pricing.

The first option would calculate the cost of gas for resources such as call data and storage. It would divide the base rate for each resource unit by the total base rate. The base rate is a fixed network rate per block that was included in EIP-1559.

A little more complex, the second option sets a base rate for using resources, but includes limits on each resource. There would also be “priority rates”, defined as a percentage. This percentage is then multiplied by the base rate, resulting in the value of the priority rate.

More work for miners

On the other hand, not everything is positive in this update. Buterin stated that the downside of the multidimensional fee structure is that miners could not simply accept transactions in order of fee value.” That is, it would not be possible to accept transactions from the highest to the lowest rate.

In this case, miners would have to balance the dimensions of each transaction. For that, it would be necessary to solve additional mathematical problems. Therefore, it is possible that some of them are resistant to the new proposal.

However, the priority right now is the next major update. The ETH network is currently preparing for the Merge, which will merge ETH with the Beacon Chain and effectively end Proof of Work (PoW) mining. Testing is already underway on the testnet, and full deployment is expected in the first quarter of this year.

EIP-1559 was deployed in August as part of London’s update to burn a portion of transaction fees in order to make fee pricing more predictable. Once it went live, 1.36 million Ether (ETH), or approximately $4.7 billion in current values.