Oct 15, 2022
Why do Ethereum transactions cost more?
Spreadsheet of validator requirements and network performance.
❓Why are Ethereum fees expensive❓
What makes Solana, Polygon and Avalanche cheaper?
Three key factors:
-> Bandwidth (validator internet speed)
-> Computing power
-> Supply vs Demand
Here’s an explainer with examples:
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🔹Blockchain = database where you pay to add data
-> Making a transaction means adding data
-> Transactions are processed in batches (blocks)
-> The time between blocks is the “block time”
-> Each batch is limited in size, called “block size”
♦️ An example for Ethereum
- The average batch size is 70 kB (kilobytes)
- Batches of transactions happen each 12 seconds
So:
-> Processing rate = 70 kB / 12 s = 6 kB/s
-> This is about 15–30 transactions per sec
🔹Average processing rates for major chains:
-> Solana: 3,000 kB/s
-> Polygon: 25 kB/s
-> Bitcoin: 2 kB/s
-> Ethereum: 6 kB/s
-> Avalanche: 0.6 kB/s
We’ll go through each one by one.
First, a look at “Bandwidth” and “Computing power”.
♦️ Bandwidth ~ Processing Rates ~ Internet Speed
- A network of computers processes each blockchain
- These computers are called “validators” or “nodes”
- Validators communicate over the internet
So, processing rates are limited by internet speeds.
🔹Validator computing power limits processing rates
Recommended validator/node requirements, GB RAM:
-> Solana: 256
-> Polygon: 32
-> Bitcoin: 2
-> Ethereum: 32
-> Avalanche: 16
🔹Summary of transaction fee economics
Transaction fees depend on supply + demand
All else equal, blockchains with:
- Higher processing rate capabilities have lower fees
- Less people using them have lower fees
Let’s apply this to blockchains one by one.
♦️ Why are Solana transactions cheap? (<$0.01/tx)
Solana requires validators to have:
-> Very fast internet
-> Lots of computing power
Drawbacks:
- Solana crashes frequently
- Validators are few in number and specialised
🔹Why is Ethereum expensive? (>$1/tx)
- Low validator internet speed requirements
- Moderate validator computing power reqs
Benefits:
-> The network has never crashed
-> Lots of validators
Drawbacks:
- Slow network processing relative to demand
- High transaction price
♦️ Why are Bitcoin fees expensive (>$1/tx)
Very loosely, it’s the same situation as Ethereum.
(I won’t get into the ETH/BTC centralisation debate)
🔹Why is Polygon cheap? (<$0.1/tx)
More supply: Faster processing rates
- Higher minimum validator internet speed
Less demand: Transactions are valued less
- Fewer validators than Ethereum + more crashes
♦️ Why are Avalanche fees moderate (~0.1/tx)?
Similar situation to Ethereum but:
- Demand for network transactions is lower
❊ In Summary
Ethereum fees are high because:
- Validator computing power requirements are low
- Internet connection requirements are low
This allows for:
+ More people to run validators
+ Lower chance of the network crashing
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