High gas fees have plagued Ethereum off and on for months, so much so, that there has been a boom in funding and uptake around layer 2 solutions such as Polygon, Arbitrum and Optimism.
A new project is taking a different tack, though, and hoping to foster better communication between two groups of Ethereum stakeholders whose incentives are often misaligned: miners and users.
The Ethereum Eagle project (EGL), launching Friday, is an effort to provide a signalling mechanism for the miners and community to strike the “right” balance between gas limits and block size.
“The idea for EGL comes from the fact that we constantly see every six months on Twitter, people are ranting about the gas limit,” said bloXroute Head of Strategy and Operations Eleni Steinman. BloXroute, a blockchain scalability company that focuses on providing scaling without protocol changes, is developing the project.
In Ethereum, miners have the ability to determine block size, to a certain extent. Miners can change the block size of a subsequent block by 0.1%, so while there are small fluctuations back and forth in the gas limit over time, the general baseline is the gas limit set by the majority of the hash power. But Ethereum miners can change the gas limit in large movements as well.
Basically, larger blocks create lower gas fees but less profits for miners, while smaller blocks create higher gas fees and are more profitable.
Giving mining pools control over block size has caused incentives between miners and users to be decoupled, bloXroute contends.
“Lower gas limit (and higher gas fees) means more short-term income for miners, and adjusting the gas limit up generally translates to earning less, without clarity when the demand will make up for it,” the project wrote in a blog post laying out the EGL project in more detail, adding:
“A higher gas limit may push Ethereum to require more than the average consumer PC to run a node, preventing regular users from running their own node. This is an incentive and a ‘pricing’ problem, and it requires a solution to allow Ethereum to continue its growth safely.”
The boom in decentralized finance (DeFi), not to mention non-fungible tokens (NFTs), has contributed to high gas fees that can make transacting on Ethereum prohibitively expensive for many users.
What EGL does
Steinman said the EGL solution has three parts.
First, anyone with Ethereum can participate in EGL by staking ETH.
The staked ETH is used to give value to EGL tokens, with EGL’s value increasing the more ETH that gets staked. There is a hard cap of 4 billion EGL.
For example, according to Steinman, if 10,000 ETH is staked and 750 million EGL is used to match, then 1 ETH equals 75,000 EGL. If it’s 20,000 ETH staked, then 1 ETH equals 37,500 EGL, implying a higher value.
EGL having value from the get-go is a key piece of the puzzle, since the token will be used to incentivize behavior among Ethereum miners.
“We’re not raising money for this; it’s purely for the Ethereum community,” said Steinman.
The second part is that anyone who holds EGL, every week gets to vote on what they think the right gas limit is. A weighted average of those votes and numbers gets passed, and as miners mine blocks that match this gas limit, they get rewarded in EGL.
“That allows the community to coordinate amongst themselves about what they think the right gas limit answer is,” said Steinman. “If you want to rant on Twitter and get people to vote with you, you actually need to have good research to have people put their money where your mouth is, but now you have a mechanism to get miners to follow what the community wants because we’re rewarding them in the EGL token.”
The third part here, according to bloXroute co-founder and CEO Uri Klarman, is that there is only a carrot, no stick. Miners are not penalized if they choose not to go with a suggested gas limit; they’re only rewarded for doing so.
It’s an incentive that had not existed previously, said Klarman. “Because the closer they follow the desired gas limit, the more EGLs they get.”
Attention hack?
But how do you draw the attention and participation of the large actors that matter in the Etherum ecosystem?
To that end, the Eagle project has set parameters that, for a weekly vote to pass, a minimum threshold of staked EGL must be met. If it misses that threshold, the desired gas limit does not remain static, but rather shifts to 5% less than the “desired” gas limit that was up for consideration.
The idea here is that if people continue to not vote, the gas limit slowly slips further and further below what voters indicate they want, and the community ends up back where it was in the first place, with low gas limits and high fees.
“By launching EGLs with clear value from genesis, miners are incentivized to want to earn free EGLs,” said Steinman. “Knowing this, holders will want to vote and affect the gas limit since miners are incentivized to listen.”
There will certainly be challenges to a model such as this gaining traction, according to Compass Mining Editorial Director Will Foxley (previously a CoinDesk reporter).
“The social layer is the hardest part of any crypto-project, and historically the relationship between Ethereum miners and developers has proven to be one of the more contentious in the ecosystem,” he said in a message. “Most developers recognize the way block sizes work in Ethereum is a net negative for the space, but fixing it remains difficult.”
Foxley is skeptical that a token can fix what amounts to an engineering issue on the Ethereum base layer. He said It’s hard to see mining pools respecting token votes or Ethereum developers using the token.
Eth 2 questions
Ethereum 2.0, the network’s proof-of-stake overhaul, is on the horizon, and Eagle says it could remain relevant when Ethereum miners cease to be a thing.
Eagle’s blog post says the gas limit concerns will shift from miners to validators with a proof-of-stake model. With that, the “proper” or “right” gas limit will shift from centralized mining pools to more decentralized validator operators, only accentuating the need for a tool such as EGL.
“It seems unclear at the moment if Eth 2 will fix this issue by moving block size adjustments to validators,” said Foxley. “Most validators are staking with exchanges, so it’s likely that exchanges become block size arbiters rather than miners. Of course, much of this remains to be seen.”
Source: Coindesk
