This token can bridge the incentive gap between Ethereum miners and users
High gas fees plagued Ethereum for months, to the point where Layer 2 solutions like Polygon, Arbitrum and Optimism in adoption and inflows have exploded.
A new project, however, goes a different direction and hopes to foster better communication between two groups working on Ethereum, whose incentives often diverge: miners and users.
The Ethereum Eagle project launched this Friday (EGL) is an attempt to provide a signaling mechanism for miners and the community to find the “right” balance between fuel cap and block size.
Eleni Steinman, Head of Strategy and Operations at BloXroute, said:
“The idea for the hour of birth of EGL arose from the fact that every six months we see on Twitter that gas limits are being discussed.”
BloXroute is a blockchain scalability company developing the Ethereum Eagle project. They mainly focus on providing scalability without changing the protocol.
In Ethereum, miners have the option of determining the block size to a certain extent. Miners can change the block size of the next block by 0.1%. Although there will be small swings in the gas limit up and down over time, the gas limit is essentially set by the majority of the hash power. In addition, Ethereum miners can also change the gas limit by a larger percentage.
Essentially, larger blocks generate lower gas charges but less profit for the miners, while smaller blocks generate higher gas charges and are more profitable.
Giving mining pools control over block size has distorted incentives between miners and users. BloXroute writes in a blog post:
“Lower gas limits (and higher gas charges) mean less revenue for miners, and higher adjustments to the gas cap often mean less revenue without knowing when demand will match. A higher gas limit could result in Ethereum requiring more of the average user’s computers to run a node, preventing ordinary users from running their own node. That is an incentive and also a question of “pricing”. It requires a solution so that Ethereum can continue to grow safely. “
The explosion in the decentralized financial sector (DeFi), not to mention non-fungible tokens (NFT), has contributed to high gas fees and made transactions on Ethereum expensive for many.
EGL does get that What?
Steinman says the EGL solution consists of three parts.
First, anyone using Ethereum can join EGL by staking out ETH.
The staked ETH is used to add value to the EGL token, with more ETH staked as the value of the EGL increases. However, the limit is set at 4 billion EGL.
For example, if, according to Steinman, 10,000 ETH are staked out and 750 million EGL are used, then 1 ETH equals 75,000 EGL. If 20,000 ETH are staked out, 1 ETH equals 37,500 EGL which implies a higher value.
The intrinsic value of EGL from the start is an important component, as the token is used to promote the behavior of ETH miners.
“We’re not collecting money for the project, but obviously for the Ethereum community,” said Steinman.
Second, anyone who owns an EGL can vote weekly on what they think is the most appropriate gas limit. Regardless of which vote average is higher and the numbers are exceeded, miners at EGL will be rewarded for mining blocks that meet this gas limit.
“This enables the community to work together on the right gas limit. If you want to brag on Twitter and get people to vote with you, you really have to do your due diligence to get people to put money in your mouth, but now you have a mechanism to get miners to do so to do what the community wants, because we reward them with EGL tokens. “
Third, according to BloXroute co-founder and CEO Uri Klarman, there are only rewards, no penalties. Miners will not be penalized for not applying the proposed gas limit; but they are rewarded for that.
This is an unprecedented kind of incentive, Klarman said.
“Because the closer you get to your desired gas limit, the more EGL you get.”
How do you get attention??
But how do you get the attention and participation of the key players in the Ethereum ecosystem?
To this end, the Eagle project has set parameters that must meet the minimum EGL staking threshold in order to pass a weekly vote. If this threshold value is not reached, the desired gas limit value changes to 5% lower than the considered “desired” gas limit value.
The idea is that if people still don’t vote, the gas limit will slowly slide further and further below the desired value. Accordingly, the community will return to its original location, with low gas limits and high fees.
“Releasing uniquely valuable EGLs from Genesis motivates miners to want to earn free EGLs. From there, the owners will want to vote and influence the fuel cap because the miners have an incentive to listen. “
According to Will Foxley, Compass Mining’s editorial director, there are many challenges to this high-profile model.
“The social aspect is the hardest part of any crypto project, and historically, the relationship between Ethereum miners and developers has proven to be one of the most controversial in the ecosystem. Most developers recognize how block size works in Ethereum as a negative factor for the space, but it’s still difficult to fix. “
Foxley is skeptical that a token can overcome technical problems on the Ethereum base layer. He said it was very unlikely that mining pools would respect token votes or that Ethereum developers would use that token.
Ethereum 2 One more unanswered question
Ethereum 2.0 is in the works and Eagle says they could still be relevant once Ethereum miners are no longer an issue.
Eagle’s blog post claims that concerns about gas limits will shift from miners to validators in the PoS model. This shifts the “right” or “right” gas limit from centralized mining pools to more decentralized validator operators, which further demonstrates the need for a tool like EGL.
On the other hand, Foxley commented:
“At the moment it seems unclear whether ETH 2 will fix this problem by moving the block size adjustments to the validator. Most validators stake out exchanges, so exchanges are more likely to become block size decision makers rather than miners. Much of it remains to be seen, of course. “
At home at home
According to Coindesk