As ETH reaches new highs and the larger DeFi market booms, average gas prices have remained surprisingly stable throughout April––and that may be all thanks to one project working at the very core of the chain. Flashbots Alpha is a proof-of-concept communication channel between traders and miners that allows formerly inefficient on-chain bidding wars to …
As ETH reaches new highs and the larger DeFi market booms, average gas prices have remained surprisingly stable throughout April––and that may be all thanks to one project working at the very core of the chain.
Flashbots Alpha is a proof-of-concept communication channel between traders and miners that allows formerly inefficient on-chain bidding wars to take place off-chain. Some Ethereum analysts are saying the project is keeping transaction costs low as it incentivizes miners to bundle transactions without arbitrarily inflating gas prices.
Recently, Flashbots reported that 12 mining pools accounting for over 58% of Ethereum network hashrate are now mining on Flashbots, with 90 unique active MEV searchers successfully getting their bundles mined in March up from only 23 successful searchers in February. By April 1, 13.9% of the total number of ethereum blocks included flashbots transaction bundles.
This has coincided with a marked decrease in high-gwei transactions with fees over 2 ETH in the mempool.
(Flashbots: Flashbots, Etherscan, comparing trend over time of 2+ ETH miner tips txs with number of 2+ ETH gas fee txs. Date range: Jan 1-Apr 1, updated as of UTC 09:00, Apr 12, 2021)
Flashbots is a research and development organization aiming to mitigate the negative effects of Maximum Extractable Value (MEV) techniques, which is essentially when a miner, validator, sequencer, or other privileged protocol actor arbitrarily includes, excludes, or reorders transactions from the blocks they produce for extra profit.
Oftentimes, this plays out in the form of “frontrunning” bots, which pay gas fees higher than that of an already known transaction in order to skip ahead in priority.
Bloated Gas Prices
The biggest negative side-effect of MEV techniques are artificially bloated gas prices.
Flashbots Alpha solves this by combining a modified fork of the Ethereum Geth client, MEV-Geth, and a transaction bundle relayer, MEV-Relay, to allow traders or “searchers” to send Flashbots transaction “bundle” requests to approved miners, alongside a sealed tip. MEV-Geth selects the most profitable bundles, and when a bundle is included in a block, the miner receives the searcher’s tip.
Since everything is off the Ethereum mainnet, there are no gas fees for failed transactions. Moreover, both traders and miners reap the benefits of MEV strategies without clogging up the system for everyone else.
Stable Gas Prices
Average gas fees have been relatively stable throughout April, despite rising ETH prices, which have historically driven activity to the Ethereum chain. According to data from the “Ethereum Average Gas Price Tracker” on ycharts.com, the average gas price when ETH climbed to a new record on April 13 was 120 gwei. This is lower than the average gas price during most of March, which oftentimes surpassed 150 gwei.
To be sure, Flashbots isn’t necessarily the only cause of the decreased gas prices. That said, the lower fees have generally coincided with an increase in the percentage of blocks with at least one no-gas fee transaction due to Flashbots.
(Source: Alex Svanevik – % of blocks with at least one 0-gas-price transaction)
While Layer 2 has been hailed as the solution to high transaction costs, Ethereum users will be thankful that a project is making Layer 1 transactions cheaper as scaling projects get ready to go live.