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Vitalik: L2 transaction fees need to be under 5c to be ‘truly acceptable’

Despite Layer-2s offering relatively cheap transactions, Vitalik Buterin said that all transactions need to be under $0.05 to be truly acceptable.

Ethereum (ETH) co-founder Vitalik Buterin believes that Layer-2 transaction fees need to be under $0.05 to be “truly acceptable.”

Buterin made the latest comments in response to a Twitter post from the Bankless podcast host Ryan Sean Adams, who shared a screenshot of the average transaction fees for eight Ethereum Layer-2 platforms.

The data is from L2fees.info, a website that compares the cost of Ether’s Layer-1 network in comparison to Layer-2s built on top of it.

The only Layer-2 to meet Buterin’s desired transaction fee under $0.05 is the Metis Network at $0.02, however a token swap on the platform still costs $0.14. Fees sharply increase from there, at $0.12 per transaction on Loopring and going all the way to $1.98 per transaction on the Aztec Network.

Ethereum’s Layer-1 is relatively affordable at present at $3.26 per transaction and a whopping $16.31 per token swap, however that only lasts until Yuga Lab’s releases another collection of NFTs where fees can skyrocket to $14,000 per mint.

Adams emphasized the importance of Layer-2s for keeping Ethereum affordable, noting that “this is Ethereum and it's not expensive,” but Buterin suggested it wasn’t there yet:

“Needs to get under $0.05 to be truly acceptable imo. But we're definitely making great progress, and even proto-danksharding may be enough to get us there for a while!”

Buterin’s affordable transaction goal is a long held one that he first stated during an interview in 2017 that “the internet of money should not cost more than 5 cents per transaction."

In January, Buterin said he still stood by this goal “100%” as part of a lengthy Twitter thread going over some of the key things he’s said or written over the past 10 years.

“That was the goal in 2017, and it's still the goal now. It's precisely why we're spending so much time working on scalability” Buterin said.

Related: ETH gas price surges as Yuga Labs cashes in $300M selling Otherside NFTs

Short term gas fee reduction

The proto-danksharding or EIP-4844 that Buterin referred to as putting downward pressure on fees in his response to Adams, is a recently proposed upgrade to Ethereum that will see key elements of danksharding — a new and simplified design of previous sharding designs — implemented onto the network without any sharding upgrades being initiated.

Proto-danksharding will enable a new type of transaction dubbed the “blob-carrying transaction” that carries an extra 125KB worth of data (blob) that cannot be accessed by the Ethereum Virtual Machine (EVM). The general idea is that this will help the network scale significantly in the short term while reducing congestion and competition for gas usage, thus lowering gas fees.

“Because validators and clients still have to download full blob contents, data bandwidth in proto-danksharding is targeted to 1 MB per slot instead of the full 16 MB. However, there are nevertheless large scalability gains because this data is not competing with the gas usage of existing Ethereum transactions,” Buterin wrote in a blog post last month.

While Ethereum’s roadmap is notoriously flexible the shard chains upgrade is slated for sometime in 2023 well after the merge of the Mainnet with the Beacon Chain.

Shard chains provide avenues to horizontally and cheaply store data across the network, which in turn spreads the load, reduces congestion and increases transaction speeds. Both Ethereum and its Layer-2s are expected to benefit from this dramatically.

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Eth2 is no more after Ethereum Foundation ditches name in rebrand

“By removing Eth2 terminology, we save all future users from navigating this confusing mental model,” the Ethereum Foundation stated.

The Ethereum Foundation has removed all references to Eth1 and Eth2 in favor of calling the original blockchain the “execution layer” and the upgraded Proof of Stake chain the “consensus layer.”

Ethereum’s long-awaited transition from a Proof-of-work mining model to a Proof-of-Stake (PoS) consensus mechanism is expected to go live around in the second or third quarter of this year.

Announcing the change the foundation cited a number of rationales including a “broken mental model for new users,” scam prevention, inclusivity and staking clarity.

In a Jan.24 blog post, the Ethereum Foundation noted that the branding of Eth2 failed to concisely capture what was happening to the network via its series of upgrades:

“One major problem with the Eth2 branding is that it creates a broken mental model for new users of Ethereum. They intuitively think that Eth1 comes first and Eth2 comes after. Or that Eth1 ceases to exist once Eth2 exists.”

“Neither of these is true. By removing Eth2 terminology, we save all future users from navigating this confusing mental model,” the blog post added.

Under the new terminology, the combination of the execution layer (Eth1) and the consensus layer (Eth2) will be labeled as Ethereum, while individual features such as the beacon chain, merge and shared chains are now referred to as “upgrades.”

Eth2 rebrand: The Ethereum Foundation

The foundation also stated that its re-branding of Eth2 would help “bring clarity to eliminate” scams in which malicious actors dupe victims — unaware that their Ether (ETH) will automatically switch to Eth2 following the merge — into swapping Ether (ETH) for fake ETH2 tokens.

“Unfortunately, malicious actors have attempted to use the Eth2 misnomer to scam users by telling them to swap their ETH for ‘ETH2’ tokens or that they must somehow migrate their ETH before the Eth2 upgrade,” the post read.

The news saw a relatively apathetic response in the r/Ethereum subreddit, with most users joking about the change, or complaining about the length of time the merge was taking.

“Don’t care what you call it, just fucking ship it soon plsss” said Redditor ghfsgiwaa.

User Kristkind stated that the attempted rebrand has come “too late”, noting that the term Eth2 has already been widely adopted by the media and users:

“Everybody in the media, even the crypto-related one, runs with the term 2.0 or simply Eth2. And honestly, I think it is better that way, because [it’s] way easier to get for the (semi-)layperson, than ‘consensus layer’, which needs you to understand the architecture of the network.”

Relat Ethereum white paper predicted DeFi but missed NFTs: Vitalik Buterin

Following the merge and transition to PoS scheduled for later this year — for real this time — the remaining milestone of Ethereum’s current roadmap is the shard chains upgrade that is set to into effect in late 2022/early 2023.

The introduction of shard chains will see Ethereum’s network load spread across 64 new chains in order to enhance its scalability and capacity.

Despite 2022 gearing up to be a bullish year for Ethereum fundamentally, the price of Ether has taken a hefty hit amid the current downturn across stock and crypto markets, dropping 40% over the past 30 days to sit at around $2,437 at the time of writing.

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