The Inevitability of Fees in Blockchain
A blockchain network can be visualized as a global system connecting computing resources to operate as a singular, massive computer. Ethereum is a key example of such a network, linking various computers to perform specific tasks. These tasks, known as smart contracts, are essentially computer programs or applications, providing a straightforward way to understand their function. Within this colossal computer, a range of programs and applications are installed, available for anyone to utilize. The emergence of this grand-scale computer has captivated a small but dedicated group of enthusiasts in the blockchain or Web 3 realm. This computer's uniqueness lies in its global distribution of computing resources, ensuring security while remaining publicly accessible, a rare combination in traditional computing resources.
Despite its public accessibility, this extensive computer network has a distinctive feature – the requirement of fees for using programs or applications. While observing others' use of a program or the outcomes of an application is free, actively running a program or application incurs charges. This fee system serves two primary purposes: managing the high demand for network use and compensating those contributing computing resources. Without incentives for resource providers, the globally spread network could gradually decline. Excessive program usage can strain the network's capacity, risking overload. Ethereum's solution is to implement fees for program execution, with varying costs based on each program. To prevent resource-heavy programs from overwhelming the system, the concept of "gas" was introduced as a transactional fuel, coupled with a maximum gas limit per block, controlling the total computing resources available per block. In Ethereum's ecosystem, users must pay predetermined gas amounts for each program execution, compensating resource contributors or being nullified.
If a transaction exceeds its gas limit, it is deferred to the next block. This means extensive program execution, especially if malicious, can significantly delay crucial operations. Prolonged delays of profitable programs due to high program traffic could lead to users abandoning this network. Balancing fees is complex: lower fees might invite more users but also facilitate potential attacks; higher fees, while deterring attacks, could alienate regular users due to affordability issues. Dynamic fee adjustments, akin to an auction system, were introduced to address this, allowing users to bid higher for urgent executions and offering standard fees for non-urgent ones. This complexity arises from incorporating gas into the fee structure.
Gas comprises two elements:
- Gas Limit: Indicates the maximum gas usage for a specific transaction.
- Gas Price: Reflects the cost of purchasing gas.
This fee structure, integral to the network's operation, is pre-calculated, reducing the need for explicit specification. As blockchain technology progresses, fees might reduce, but their elimination is unlikely. Zero or near-zero fees could lead to resource oversaturation due to increased usage. No matter the network's capacity, escalating user numbers could render it ineffective. Addressing program execution fees remains crucial. While there's an option for third parties to cover these fees, ultimately, someone must bear the cost. Therefore, not all data is suitable for blockchain storage; only data that can generate value for users or owners merits blockchain integration. This selective approach stems from the need to manage assets and associated transaction fees. Simple transfer programs might see limited use, whereas programs offering token loans with interest rates exceeding the fees might gain more traction.
In essence, blockchain is a substantial computer where resource utilization incurs costs. This fundamental system is unlikely to change, underscoring its importance for those aspiring to develop blockchain applications.
Image source: Generated through OpenAI's DALL·E.
