How Ethereum’s gas fees could be on a lasting downtrend

Reynaldo Marquez

4 years ago

2 mins read

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Anonymous developer of protocol Mist, Stephane, has sparked a debate over the possibility of a reduction in Ethereum gas fees. Data from Etherscan points to a reduction in the average gas price since it skyrocketed in mid-2020.

Although the reduction seems subtle now, Stephane has predicted gas prices will go below 20 by the end of 2021. The developer wrote via Twitter:

Overheard from a major mining pool: “Flashbots is cause of recent low gas prices as traders shut down their PGA bots”.

As stated above, the reduction could come from the broader use of Flashbots, an organization that defends a transparent Miner Extractable Value (MEV) ecosystem. In contrast, Public has Auction (PGA) bots, a way to front-run transactions on the network that could be becoming less usable.

Flashbots are positive for Gas’ price reduction. PGA bots have the opposite result. Stephane said:

With 58%+ of hashrate now being activated on flashbots, it seems like we are crossing the threshold where PGA bots can no longer compete. PGA bots get beat by flashbots almost every time.

In July, Hard Fork London is set to integrate EIP-1559 and change Ethereum’s fee model by creating a “burn fee” and a “tip fee”. The latter will go to the miners. The proposal has created a great deal of controversy and resistance from this sector.

They claim their earnings will take a severe hit, MEV and Flashbots seem like an alternative that can benefit all actors in the ecosystem. As shown by data scientists Alex Svanevik in the graph below, “The Flashbots effect” could be real and its positive impact might be felt across the blockchain.

What are Flashbots and their impact on Ethereum?

As mentioned, Flashbots is an organization that researches and develops ways to reduce the “negative externalities” and risks that come from MEV.

As explained by developer Silto, one of the reasons Ethereum gas price has increased is due to the “bidding war” between PGA bots. These entities try to get “the same tx include first on” Ethereum’s blockchain. The developer explained:

If multiple bots detect an arbitrage between pools, they will craft the same tx, send it to the mempool, but then detect that other bots are on it too and start raising the gas price on their tx to be included first, like in an auction.

The bots benefit from the arbitrage if the profits stay below the transaction cost. The miners, as the developer said, get a “fat fee” from this race. Data from Flashbots register profits of over $45.6 million in the past month.

However, Ethereum’s users suffer the consequences. Flashbots have created an alternative that uses 0gwer gas price and the infrastructure to support it:

Flashbots created an Eth node for miners, that not only watches the mempool like any other node, but also connects to a relayer (a server) operated by Flashbots. This MEV-Relay is a kind of parallel channel that directly connects miners to bots that want their tx included.

ETH is trading at $2.152 with 1,1% profits in the 24-hour chart. In the weekly and monthly chart, ETH has profits of 56,9% and 17,9% respectively.

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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