EIP4844: L2 transaction fees will be opened soon to reduce the foreseeable depression effect

Since Ethereum core developers have laid out Ethereum’s roadmap around Rollups, it’s clear that Rollups will play a central role in Ethereum’s future. However, before the long-promised data sharding (or Danksharding) can be realized, Ethereum needs to reduce transaction fees as soon as possible, otherwise it will risk continuing to lose new users to other L1s.

Leading Rollup teams have come up with their own solutions to reduce transaction fees and increase developer experience on their respective L2. These include the Optimism team and the Arbitrum team optimizing transaction compression technology. Arbitrum has launched their next biggest upgrade, Arbitrum Nitro, which will compile Arbitrum Fraud Proof into WASM, which will greatly improve the developer experience on Arbitrum L2 and also reduce latency.

However, if we look at the unit cost of L2 transactions, we see that the largest chunk is "Call Data". Call data is crucial to the security mechanism of L2. Basically, in the event of malicious validator activity on L2s, the entire L2 chain can be rebuilt by using Call Data issued on L1s. However, publishing call data on L1 is costly and currently accounts for more than 80% of L2 transaction fees.

So how to solve this problem? Fundamentally, more space needs to be created for data on L1 to reduce L2 transaction fees. Data sharding (DankSharding) will help build a huge data space on Ethereum L1. However, it is expected to take quite a long time (about 18 months if all goes well) to fully realize DankSharding on Ethereum.

This is why the Ethereum core developers and the Rollup team started to propose differently, building an instant data space on L1 and making Rollup immediately price-competitive in the L1 market. EIP-4844 is the result of these efforts and is expected to bring down Rollup fees by orders of magnitude.

In our previous article, we explored Ethereum's new sharding design, DankSharding, which has some significant simplifications compared to the previous design. EIP-4844, also known as proto-danksharding, basically implements most of the logic of the data sharding specification and prepares for Danksharding.

So how is this done?

Rather than providing more space for transactions on the L1 block, Danksharding provides more space for the data itself (the blob of transaction data). This data blob needs to be network accessible. Rollups will utilize the space in these data blobs and store compressed transaction data in them. A transaction carrying a blob is a normal transaction with an extra block of data called a blob. Compared with more expensive call data, Blob has a large data size and can provide more data space for L2.

What are the advantages of EIP-4844?

• The biggest benefit of EIP-4844 is to reduce L2 transaction fees by an order of magnitude, making it more competitive with other L1s. Pseudotheos believes that it is possible to reduce the cost of Optimistic Rollups to less than $0.01, reducing transaction fees to less than 100 times the current level.

Source: Pseudotheos argues (https://twitter.com/pseudotheos/status/1504457560396468231/photo/1)

• Another advantage of EIP-4844 is that it provides a good soil for future applications of Danksharding to easily implement data sharding in the future. A specific example is that EIP-4844 can be compatible with future changes in the consensus layer, helping L2 developers get rid of the need to upgrade.

• It also introduces a multi-dimensional fee market for Ethereum L1, which separates usage and fees for different types of resources, such as EVM applications, block data, witness data, and state size. And all of these resources have different capacity limits, which means that if each resource has a different pricing mechanism, they will be allocated in an efficient manner. However, Ethereum L1 currently uses a single metric to measure the cost of using all these resources, that is, Gas fee, which is very inefficient.

• Proto-danksharding introduces a multi-dimensional EIP-1559 fee market, in which there are two resources, gas fee and blobs, with independent floating gas prices and limits.

• That is, there are two variables and four constants:

What are the disadvantages of EIP-4844?

• Since all validators and clients of Ethereum L1 need to download the full blob content, this increases the cost of running such a node and may raise the barrier to entry for running such a node. However, combined with some other proposals, such as EIP-4444, it is possible to require nodes/clients to only store these data blobs for a certain period of time (1-3 months).

Source: https://www.eip4844.com

What's next for EIP-4844?

Although the main structure of EIP-4844 has been clarified, there are still some aspects that are being explored. It goes without saying that the Ethereum core team is currently preoccupied with the upcoming merger, which is expected to happen sometime in Q3. The core developers mentioned that EIP-4844 is expected to be implemented around 6 months after the merger, i.e. sometime in Q1-Q2 2023.

Both Danksharding + EIP-4844 make it clear that the future roadmap of Ethereum L1 is to become Rollups of data availability + security layer. Danksharding is expected to be implemented in the next 18-24 months, while EIP-4844 itself will be implemented in 6-9 months.

By Gokhan Er, IOSG Ventures