We need to talk about gas fees...
At Multis we've spent our summer building: revamping our banking app, launching paying accounts, and implementing a first ever subscription automation service on the blockchain. While we're thrilled for these successes, there is a dark cloud hanging over us all and that's Ethereum network fees which this month have skyrocketed quite literally off the charts.
The effects of aggressive yield farming, massive amounts of cash flowing into DeFi, and trading bots have been felt by all of us. Concretely, this means that technical expenses have cost more than we had initially budgeted. Philosophically, it means that the Ethereum blockchain and DeFi, instead of being equalizers that provide radical access to financial services, appear only accessible for the super rich. As our CTO Théo, says "These fees are fine for high-value transactions: if you're minting 1M DAI or if you're paying 50K DAI to someone then $2 in gas fees isn't a problem."
But this is bad news for the Multis community: entrepreneurs who use crypto to pay salaries, earn interest on their treasury, and get paid. We're currently working on finding ways around this issue, and in the spirit of transparency, we wanted to share some of our best practices for our users as well as the internal work we've been doing to spend less in network fees.
On the 10th of August, we launched automated subscription deductions. We're proud that this feature offers our users a decentralized way to pay for Multis. However, unlike a direct debit authorization, our subscription smart contract withdraws monthly fees via a set allowance. Setting the allowance to 29 DAI once means that at the end of the month the allowance will be at zero and you will have to reset it again. This is why we recommend that you set up a year's worth of subscription fees on your allowance to avoid having to reset it every month (and potentially pay gas fees on the authorization). As we've said before, users remain in control of their funds and can cancel their subscription at any time by setting it to zero.
It makes sense that network fees will be lower when the network is less crowded. According to recent sources, low network usage hours, are between 6PM UTC and 12 AM UTC. To avoid paying high fees, it's also recommended to submit transactions to the Ethereum blockchain on the weekend as there tends to be less activity on the network overall. For up-to-the minute updates, we recommend following @Ethgasprice on Twitter.
As anyone who is part of the Ethereum blockchain can tell you, creating a new multisignature wallet can be costly in terms of network fees. We are looking into solutions to mitigate high gas price and the first experimentation using the Smart-Contract Proxy pattern to deploy our multisig is very encouraging and might be live very soon. This should reduce gas fees considerably on our end. We'll of course share more, as this develops 😊
There are currently a number of projects underway that are addressing Ethereum network fees. We think there are promising aspects in all of them but inherent challenges that will have to be surmounted.
There is of course the much awaited Eth 2.0 upgrade, which aims to improve efficiency, speed, and scalability- drastically reducing network fees. This is exciting news, but the project is still under way and it's not yet certain when the upgrade will be available, even Vitalik Buterin admitted to underestimating the amount of time sharding and proof-of-stake features would take his team.
Another promising initiative is the Ethereum Improvement Protocol or Eip 1559— an ongoing project that aims to replace the current network fee model with a mechanism that suggests a base network fee according to demand. The Eip 1559 protocol allows users to set a fee cap, and to incentivize miners to process transactions with a gas premium. This should make network fee estimation more easily predictable. However, in order for this to happen, over 6,000 nonces on the Ethereum blockchain would need to be updated requiring massive coordination.
Layer 2 solutions have also emerged as solutions to scalability issues in blockchain networks. Layer 2 refers to protocols that sit on top of an existing blockchain, creating a secondary network with an ostensibly faster transaction speed and cheaper costs than "on chain" transactions. Layer 2 solutions are very promising but there still remains issues around composability between the Ethereum layer 1 blockchain and layer 2 solutions.
Network fees affect all of us, and our tips and workarounds are bandaids on a larger problem of scalability.
We want to hear from our community members. Gas fees are a major painpoint and we want to find ways to help you make the most of your company's crypto. Don't hesitate to reach out to us with questions at firstname.lastname@example.org. Stay tuned, this subject isn't going anywhere so we'll keep on building new solutions.