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Bitcoin News ViaBTC Capital | The Reason Behind Solana’s Frequent Downtime: Design Mistakes in the Gas Economy

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What is the gas fee? In the blockchain world, a gas fee is a fee that users pay to the blockchain network for each transaction. For example, when a user makes a transfer on Ethereum, miners must package their transaction and put it on the blockchain to complete the transaction. This process consumes the computational resources of the blockchain and the fees paid to miners are called gas fees.

Gas economy

Imagine that each public chain is a society or a city, and gas will be the currency that users need for various activities in the city and the economic designs of gas have an impact. profound impact on the future development of the public chain. Today, we will illustrate the importance of the gas economy from the aspects of performance and value capture.

Performance

– Solana’s frequent network congestion

At the beginning of May, Solana mainnet lost consensus and block generation was halted for 7 hours. The mainnet was down due to the NFT minting of a new NFT project. Users have turned to bots to submit transactions as much as possible to increase their minting success rate. This results in 6 million transactions per second on the Solana mainnet, jamming the network. Furthermore, when Solana transmits the consensus message in the form of a special transaction message between validators, the network is severely congested which also disables the normal transmission of the consensus message, eventually leading to a loss of consensus. favorable.

This is not Solana’s first outage. Last September, the public chain suffered a 17-hour downtime due to massive transaction volumes generated by on-chain bots during the launch of hit project Raydium. A 30-hour Solana downtime occurred at the end of January 2022 when BTC price dropped from $44,000 to $33,000 during a market crash and created many arbitrage opportunities. price difference. Meanwhile, arbitrage/liquidation bots on Solana, central to DeFi, continue to generate large transactions, resulting in network downtime. When comparing Solana with a typical IT system, we can say that downtime is like a DDoS attack.

「A DDoS (distributed denial of service) attack refers to adding traffic from multiple sources beyond the capacity of the network to handle so that real users cannot get the resources or services they need . Attackers often launch a DDoS attack by sending more traffic to the network than it can handle, or sending more requests to an application than it can handle. 」

Instinctively, many would think that Solana’s downtime stems from its public chain designs: Solana’s monolithic design inevitably leads to downtime.

Currently, mainstream public chains use two types of designs: modular and monolithic. Modular architecture refers to a modularized implementation where consensus, storage, and execution are implemented separately so that the collapse of the executor class will not affect the security of the class. Consensus. At the same time, the mainstream designs adopted by Avalanche’s Subnet, ETH 2.0, and Celestia’s Compilation can all diverge large transactions. On the other hand, although Solana is generally designed to enable fast transactions, scalability and security have been sacrificed.

However, the modular design of the public chain is not key because while consensus remains secure, individual aggregation can still experience downtime in the face of transactions. overload translation in a very short period of time. In other words, the modular design only reduces the systemic risk (e.g. a certain aggregation process may pause but the rest may persist) to the public chain. The gas design is the real reason behind Solana’s downtime, and more ongoing network downtime if the design isn’t improved.

– Gas mechanisms of different chains

The figure below shows the gas designs of the three main public chains. On Solana, the gas fee is based on the number of signatures. The more signatures a transaction uses, the higher the gas fee. However, the maximum memory capacity of each transaction is fixed, and so is the maximum gas fee per transaction, making it easy for users to calculate the cost of sending large transaction requests. Furthermore, transactions on Solana are not in sequence, which means that when the cost of submitting a large request is lower than the profit (price arbitrage, NFT mining, etc.), users will use bots to submit transactions on the Solana. large scale in order to increase the performance of their transactions. This is also the reason behind the downtime events taking place on Solana.

Ethereum and Avalanche share similar gas designs. Both have base and priority fees, which creates an inherent sequencing problem as transactions with higher priority fees are executed first. As such, although users can still use bots to create large transactions on Ethereum and Avalanche, their transactions will not be executed no matter how many requests are sent when the priority fee is insufficient. And they have to wait in line. Considering the cost of gas, such a design eliminates the possibility of network downtime arising from large transactions at the economic level.

Source[1]

– Improved by Solana

Economic isolation has always served its purpose better than methodological isolation. Solana began building her own Fee Market by introducing a concept similar to priority fees. Meanwhile, Metaplex, Solana’s NFT marketplace, will also adopt a new concept called Invalid Transaction Penalty, which means users will have to pay fees for invalid transactions when mining NFTs. .

Capture value

The capture of value is a reflection of the gas economy through the market capitalization of gas (the chain’s native cryptocurrency). The market capitalization of a base currency is roughly determined by two factors: cash flow and currency premium.

– Cash flow

When it comes to gas fees, most public chains follow the same approach: reduce gas fees as much as possible to attract users from Ethereum. From a cash flow perspective, such an approach is unsustainable. Out of the three mainstream public chains, only Ethereum stands with significant net inflows, although the network is still issuing more Ethers. If we consider additional issuance as a kind of subsidy, the net spend of Ethereum per day would be around $25.7 million if the annual release rate is 3.21%. On the other hand, Solana and Avalanche have an average income of $6,250 and $42,000 a day, with a daily net spend of $4.6 million and $1.86 million, and an annual release rate of $4.6 million and $1.86 million respectively. 6.93% and 5.22%. High net spending and high issuance rates significantly dilute the market capitalization of coins in the public chain.

Picture302

Source[2]

Let’s move on to the destination of the cash flows. Under the current Ethereum mechanism, the base fee is burned, while the priority fee is provided to the miners. Compared to Solana and Avalanche’s gas burning and distribution mechanisms that provide gas fees to validators, miner rewards are a compromise design with value capture. Ethereum uses a PoW design for block generation, and most miners adopt a business model whereby already mined tokens are sold to cover mining costs (such as electricity fees and maintenance costs). maintain). Therefore, part of the gas fees paid to miners will most likely go out of the ecosystem. It would be better to provide gas fees to validators because the cost of running a node is not as high as operating a mining plant. Since there are no significant ongoing operational costs, validators are more likely to invest the rewards they have received in nodes, which makes the ecosystem more secure without diluting the value of original currency. Burning fees can be the most direct and efficient way to capture value and benefit both node creators and token holders. Additionally, MEVs generate another major revenue stream for public chains. According to statistics from Flashbots, from 2020 to now, $600 million worth of MEVs have been paid to miners, which is a conservative estimate.

Picture303

Source[3]

– Currency premium

Currency premium refers to a public-chain coin’s appreciation of its actual value and ability to store value. Most of the existing public chain coins are undergoing massive issuance, making them a poor store of value, and actual value forms the backbone of their market capitalization. The growth of the public chain coin ecosystem will create scenarios where it can be used as a payment method. For example, most NFT transactions are settled with public chain coins. Meanwhile, most of the emerging public chains also consider practical value as the primary means of appreciation, that’s why they set negligible gas fees to attract traffic and users. new use. Meanwhile, several public chains have built hundreds of millions of dollars worth of platforms to incentivize more developers to build DApps in their ecosystems. The logic behind such an approach is to invest big to attract users in the early stages and try to recover the cost later.

Inference

In summary, the gas design of a public chain will have profound effects on the future development of a public chain, and a poor design can lead to poor value capture and even congestion. performance bottlenecks. When evaluating a public chain project, we can also get an overall picture of its future growth and development strategy through its gas designs.

[1] https://docs.solana.com/implemented-propestions/transaction-fees#congestion-driven-fees,https://ethereum.org/en/developers/docs/gas/,https://docs.avax.network /quickstart/transaction-fees/

[2] https://cryptofees.info/,https://moneyprinter.info/,https://solanabeach.io/

[3] https://docs.solana.com/implemented-propestions/transaction-fees#congestion-driven-fees,https://ethereum.org/en/developers/docs/gas/,https://docs.avax.network /quickstart/transaction-fees/

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Teja
Teja
I am passionate about journalism and using new technology to spread news. I am also interested in politics and economics, and I am always looking for ways to make a difference in the world. I am the CEO of Janaseva News, and I am 24 years old.

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