Transaction fees are a touchy subject in crypto.
First there was Ethereum, with simple trades on Uniswap going for over $100, as of Nov. 23, according to Etherscan. Now, in the wake of a weekend Twitter war in which transaction fees played a central role, users are reporting on the social network that fees on Avalanche, another Layer 1, are creeping up as well.
“Avalanche transaction fees for swaps up to $20 tonight,” tweeted Eric Conner, co-founder of EthHub, the Ethereum information resource. Conner’s screenshot shows a transaction interacting with the router contract of Trader Joe, the decentralized exchange (DEX) on Avalanche.
Fees for the contract have declined since then — they’re hovering in the $1.50 range as of Nov. 23, though swaps with transaction fees as high as $5 have occasionally appeared throughout the day.
Kevin Sekniqi, COO and chief protocol architect of Avax Labs, which supports development on Avalanche, cited two reasons for the spikes in fees. The first is a 10M gas hardcap applied every 10 seconds, which Sekniqi told The Defiant is “an ultra-conservative measure that makes blockspace on Avalanche even scarcer than Ethereum mainnet.”
Gas is a unit which measures computational effort required for transactions on the blockchain. So the gas limit is how much computation effort is available in a given timeframe. As demand for computation on a blockchain goes up, given a fixed gas limit, transactions get more expensive.
“As blockspace is consumed within these 10 seconds, the fees aggressively ratchet up to prevent the rapid creation of blocks in a very condensed time period to spam the networking layer,” said Sekniqi. The ratcheting up is a unique mechanism to Avalanche and leads to temporary spikes in fees, according to the protocol architect.
The second primary factor driving up fees is MetaMask, the crypto wallet, which has struggled to estimate Avalanches fees due to the unique mechanism, said Sekniqi. The protocol architect said that the gas limits will be removed following the introduction of something called superpruning, which essentially allows some of the blockchain’s history to be discarded. “It’ll be much faster and cheaper than Ethereum on apples to apples,” Sekniqi said.
Crypto Maxi, a pseuodonymous investor and developer, is skeptical of how much superpruning will help lower fees. “Pruning directly doesn’t influence scalability,” they told The Defiant.
While it’s unclear how much superpruning help lower transaction fees, Sekniqi does say that Avalanche will need a technology called subnets to get “infinite scalability.”
Subnets are a horizontal scaling strategy that can validate Avalanche blockchains running in parallel.
There too, Crypto Maxi is skeptical. “Subnets do not share security unlike Polkadots parachains,” they said. “Technically they will help Avalanche scale the same way as if there would be a bunch of Matic-type chains launched around Ethereum.” The developer concedes subnets are superior to sidechains.
Overall, Sekniqi is optimistic about the combination of superpruning, subnets and other optimizations, saying that “together, [the technologies] will dramatically increase the scalability of Avalanche, and thereby the broader DeFi ecosystem as it grows out of the crypto niche and into mainstream.”
Crypto Maxi thinks the breakthroughs haven’t happened yet. “Nothing offers orders of magnitude performance increases, unless we talk about stuff like zkRollups etc,” the developer said.
There’s no doubt that Avalanche is attracting users at a rapid rate. The platform hit an all-time high of 669,756 daily transactions on Nov. 21, according to block explorer Snowtrace.
That’s more than half of the mark Ethereum hit on the same day — the world’s largest smart contract platform had 1,260,939 transactions on Nov. 21.
Of course, both platforms could tweak their parameters to increase scalability and lower transaction fees, but that means there will be more expensive hardware requirements for the nodes processing the transactions, which dampens decentralization.
In all, it’s setting up to be a battle for the ages.