Fluctuating gas fees explainer
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Fluctuating gas fees explainer

DataDash: Fluctuating gas fees

What is a Gas Fee?

To understand Gas fees, one needs to look at it from the same perspective as, for example: driving a car; one requires fuel. Likewise, Gas fees are the fuel that powers the Ethereum network and the tokens that operate upon it. Gas can be explained as an essential fee required to execute a smart contract on the blockchain protocol in the blockchain world. In scientific terms, a Gas fee is a unit of measurement towards the amount of computational effort or “work” required to execute a smart contract or any tokenized operation on a Blockchain. The mechanism behind the Gas fee works on simple supply and demand, and thus the price to pay as Gas fees can fluctuate constantly depending on the network demand. So in simple terms, if more nodes are interacting on the blockchain for executing smart contract operations, given the limited quantity of computational resources on the network, the Gas price will show a significant increase. On the contrary, if the computational network resources are underutilized, the cost to execute a smart contract would decrease.

Why Gas Fees vary so much:

In general, a transactional Gas fee can be set up manually for every smart contract validation. However, in an event where the computational resources are over-utilized, smart contracts with the highest Gas fees associated with them will be prioritized for execution. Executed transactions will then be added to the Blockchain. But, if the Gas fee paid is too low or less than the average Gas fee market price, the transactions will be delayed and archived in a queue that can take longer to complete. Consequently, waiting a long time to complete the transaction often compels users to pay a higher Gas fee in order to ensure their transactions are processed efficiently and promptly. Thus in many instances, the Gas fee can be extremely expensive, especially if many users wish to send tokens on the Ethereum chain at the same time and at a fast rate. Therefore, increasing Gas fees underline the need to have a more scalable blockchain network to validate more transactions at a lesser cost.

Eth Gas Fees:

On the Ethereum blockchain network, to process a transaction, a user must pay a certain amount of Eth as a Gas fee which measures the computational effort required to execute an operation on the Ethereum network. The Gas fee under the ETH network is paid in Etherum native currency. Since inception, the Gas fee on the ETH network can be simply calculated as:

Gas PRICE per unit (in Gwei) Gas LIMIT,

Where the Gas limit is the maximum amount of Gas you are willing to pay to validate the transaction, and the Gas price is the specific amount Ether one is willing to pay for each unit of Gas. Gas prices are denoted in Gwei, a denomination of ETH, where each Ether is equal to 1 billion Gwei.

To illustrate how the Gas fee is calculated, let’s say Tim likes to pay Alex 1 Eth, and in this transaction, Tim set up a Gas limit of 25,000 units, and the Gas price is 400 Gwei. So the total Gas fee paid than would have been, Gas limits * Gas Price, that is 25000 * 400 = 10,000,000 or 0.01 ETH.

Gas price consists of two-component to validate a transaction on the Ethereum network. First, the base fee, a minimum fee per unit of Gas for being part of the Eth blockchain, is calculated by the network-based demand for block space. The second is the priority fee, which compensates miners for executing transactions on blocks. These components are expected to be set automatically by most wallets.

Now in recent years, with the increasing popularity of the Ethereum network and Decentralized Finance (DeFi) projects, the fees for the transactions of ERC-20 token have spiked up, ranging between 25$ and 900$, this is all depending on how busy the chain is at the moment.

How high are the transactions?

To see more about the transaction costs at the moment of reading, you can visit https://txstreet.com/ and see it in real-time. Tx Street gives a very straightforward overview of what is happening, how busy the chains are, and what Gwei prices are picked first. Their Visualizer is very easy to understand. There is also another one that is pretty interesting https://ethGasstation.info/ you should explore.

What is Cobo and how does it change things?

Currently, the multi-token mining community on DataDash utilizes the Cobo Custody Wallet, but this isn’t just limited to miners, this applies to all token actions on Cobo, from mining, to staking, and locking. In fact, any and all withdrawals that take place from this wallet to the ETH blockchain network incur a fee, even non-withdrawal actions. Cobo custody wallet provides users with military grade multi-dimensional security layers, emphasizing the reliability and safety of and for our users’ digital assets. In addition, Cobo Wallet is the world’s first digital currency wallet featuring proof of stake, making its user’s experience simplified to own, trade and use various digital currencies. The advantages of using Cobo include providing a long-term safe, reliable, and user-friendly interface.

The DataDash Environment

The vision is to create a vast, robust and free global data republic network to simplify and promote IoT data transactions. This vision is achieved through the enormous deployment of miners globally, which are then responsible for creating an uninterrupted and purely decentralized network. The mining community uses the state of the art MXProtocol as a consensus mechanism, entirely based upon the Proof of Participation (POP) principle. The POP guidelines ensure the developed data republic network is robust, secure, and decentralized, and in return, miners are given health ratings. These health ratings measure how frequently $MXCs are being mined and dropped into the Quarry, or one may call it a “Fuel Tank”, and every time there is a drop, there is a certain transaction fee associated with it. This fee is part of the base fee (see above), and it is the responsible component to ensure the block space. Initially, this fee component was entirely covered by the MXC Foundation and did not let the community feel the burden. However, now with hundreds of miners joining the network every day, the network has outgrown our expectations, and bearing this cost solely, is unrealistic, especially with the rise of Eth Gas prices.

Furthermore, moving Fuel around, internally in your DataDash Cobo Custody wallet is also counted as a “transaction”, meaning it costs additional transaction fees. Now, If a user decides to withdraw towards a third party wallet or on an exchange, this means that the currency leaves the DataDash App thus going through the Cobo Custody Wallet. This is the last transaction happening on the DataDash side, but also, once again, this additionally incurs Gas fees.

Before the user is charged the final Gas fees, all the transaction fees are added upon each other giving a grand total that becomes quite a significant amount of Gwei, and much higher than the current 2500 $MXC in ETH. In these cases we are continuing to ease the burden by taking away the significant portion of all the transaction fees that are happening on the DataDash App. The 2500 $MXC withdrawal fees only take a fraction of the total transaction fees into account.

In short, every movement of token within the Data Dash wallet incurs an ETH Gas fee, from mining recipients receiving MXC, to switching of MXC from a fuel tank to a wallet, across to staking and locking, binding and of course withdrawing. Every $MXC transaction requires Gas, this then results in multiple transactions per miner per hour.

(Multiple Transactions Per Day+Fuel Withdrawals+DataDash Withdrawals) x Gas price =X $MXC

We understand that this current method is not sustainable, with the recent rise of ETH Gas fees, both the Ethereum and MXC communities are feeling this and it is not sustainable. This is because, similarly to Ethereum, MXC has grown extremely fast, especially within the past 12 months. Many transactions are happening daily, not only from you as an individual but from the #DataRepublic collective. Moreover, most of those transactions occur within the DataDash Environment. Did you know, over 60% of the entire amount of the 2.6 billion $MXC tokens reside on the DataDash App? This is a sensational success for the token and the community. But, with great growth comes great responsibility, therefore, we are currently actively looking into solutions to this growth problem.

Apart from the recent spike increase in Eth Gas prices, the primary reason behind the rise of DataDash related Gas fees is that our community, network, and data republic are expanding at such a rapid rate, stretching all of our estimates. Thus, we need to find workable solutions and potentially other chain solutions. We are continuing to listen to the community, gathering feedback to ensure we make the next step the right one, for the data movement and the community. One current consideration is that of moving away from Cobo custody into an in-house solution, or alternatively continuing down the path of DAO and introducing a different third-party provider. We want to assure all supporters that solutions will be rolling out as soon as we can provide the security and the pricing model that our supporters expect from us as a service. Until that time, we ask for your continued patience, similarly to the Ethereum community, the MXC community is experiencing unprecedented growth. These are exciting times and we thank you and the tens of thousands of supporters for participating in the movement and trusting your secured tokens within the DataDash App.