Ethereum will Kill this $15 Billion Project if its Gas Fee Remains Low

If you’ve been using Ethereum for a while, then your only concern would be reduced gas fees but it’s not for these guys. Yes you’re right, we're talking about MATIC. The $15 billion L2 solutions for Ethereum.

During the early days of 2021, ETH transactional costs were crazy. It was crazy enough for us to pay $50 for sending $1 worth of Ethereum to other accounts. It’s the same for sending $5M too. But the fact is that the gas fees went as high as 500 GWEI.

Let’s understand how Ethereum works; Ethereum is a state machine. It stores accurate, straightforward information. For updated information on Ethereum, a handful of miners validate the transaction. Thus for their work of validation, we pay them a small number of transaction fees. These fees are made in the native currency of the blockchain, which is ETH.

During these early days, it’s crazy for users, and it’s hard for them to pay these insanely high gas costs or transactional costs. Most of the applications on Ethereum are micro-financial ones where the price per ticket ranges from $100 — $1000. So paying $50 for a $100 transaction is losing 50% of the funds they transfer. That doesn’t make up a perfect ecosystem. So there came upscaling solutions, the so-called L2 solutions. MATIC is a famous name among them; the transaction costs on MATIC are less than 1000x less than that of Ethereum.

So people started thinking of ZK-Rollups and Optimistic Rollups, the two kinds of L2 scaling solutions. Layer 2 implementation is a simpler one. The more secure blockchain with several validators/miners store the state (data), and the one with fewer validators/miners would compute complex transactions as they’re cheaper. But this L2 has certain drawbacks; for example, the plasma layer of Matic has a checkpoint duration of 7-days which is a longer duration and is not suitable for real-day applications. MATIC is working on it and soon will make it quicker.

But the most significant gas guzzlers on the Ethereum network were Uniswap & USDT(World’s largest stablecoin by MarketCap). They were the primary reasons for crowding the network. In any blockchain, the transaction speed is the average of the block size and the size of each transaction. Ethereum’s block size increased 100% in the YoY growth implicating more transactions in a single block that might boost the network’s throughput.

Learn more about the statistics of block size here https://ycharts.com/indicators/ethereum_average_block_size

So, in short, the nature of MATIC is to be a side-chain to boost the adoption of the Ethereum network by reducing the computational cost. But Ethereum is slowly fixing the main problem in their primary network.

Also, the L1 <> L2 communication between Matic and Ethereum is not easier for developers who follow traditional decentralized app development. It always needs an intermediary mechanism to verify transactions, making it even more challenging to maintain sync between both networks. 3-Hour wait time in PoS chain and 7-day wait time in Plasma chain (For Security Reasons, as per MATIC’s team) will not make up an application work in real-life.

Also, the infrastructure needed to build a normal D-App and L2 Dapp drastically varies, which is unsuitable for standard applications built on Ethereum. So, suppose the gas fees are just 10 Gwei. In that case, MATIC is necessary for traditional apps like yield farming, staking, lottery pools, and other financial apps where computation is less expensive & intensive.

So if Ethereum fixes the gas problem, the L2 projects become unnecessary. So investors should exercise caution in dealing with L2 projects, especially when ETH gas prices fall over 300% in less than a week. MATIC might become a dominant chain, but we cannot compare Matic to Ethereum in terms of nodes/miner/validators. Still, institutions planning to do intense and low-cost computation over a blockchain can consider Matic for sure. But this article is focused on the 90% micro-financial integral ecosystem of the Ethereum network.

Disclaimer: This article is informational and doesn’t accuse or praise any project/token/cryptocurrency in any form. If perceived in such a way, it’s coincidental. Cryptocurrencies are a volatile form of investment where you might lose your living in seconds. Consult your financial advisor for investing.