Buterin says ETH transaction costs reflect a supply-and-demand equilibrium

Ethereum co-founder Vitalik Buterin explained the current cost of transactions as the level at which demand equals supply.

First of all, why is the gasprice currently 465 gwei? Why isn’t it 1000 gwei, or 100 gwei?

The reason is: 465 gwei happens to be the current level at which demand (the number of transactions people are willing to send) equals supply (12.5 million gas of tx space in each block).

— vitalik.eth (@VitalikButerin) September 2, 2020

Buterin suggested that in a world where everyone sends transactions with 100 Gwei, demand would rise. But with the current gas limit of 12.5 million gas, the fee level would still reach 465 Gwei.

So what would happen? There would be more demand than there is space, so people would start bidding higher and higher txfees. How high would txfees go until enough people drop out that the remaining users make up only 12.5 million gas? Well, we know the answer: 465 gwei.

— vitalik.eth (@VitalikButerin) September 2, 2020

A similar picture would hold for transactions at 1000 Gwei: some people would drop out, and others would bid down fees as blocks free up to the same 465 Gwei, Buterin says.

Similarly, imagine everyone was sending transactions with 1000 gwei. A bunch of people would no longer find it worthwhile to send transactions, so they would drop out.

— vitalik.eth (@VitalikButerin) September 2, 2020

A similar picture would hold for transactions at 1000 Gwei: some people would drop out, and others would bid down fees as blocks free up to the same 465 Gwei, Buterin says.

The Ethereum co-founder noted that increasing throughput could lower fees. The proposed update EIP-2929 would raise gas costs for some operations and make increasing the gas limit safer, but Buterin regards this as a short-term solution.

The way out, in his view, is a move to layer-2 solutions. As an example, integration of Tether with the OMG Network sidechain. In the long term, this is about scalability with a move to Ethereum 2.0

Conclusion: the only solution to high tx fees is scaling. Tether, Gitcoin and other apps are doing the right thing by migrating to ZK rollups today. I’m excited about the soon-upcoming optimistic rollups that will generalize rollup scaling to full EVM contracts.

— vitalik.eth (@VitalikButerin) September 2, 2020

Earlier, the average Ethereum network fee reached a historic high of $10.

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