Exactly on August 5, 2021, EIP 1559 was activated. It took 111 days to burn the millionth ETHER.

Below are some interesting facts related to the burning of Ethereum:

Total value of ETHERS burned: $ 3,827,057,069

 If EIP 1559 had not come into force – this amount would go to miners.

 Highest Daily Burnout: 16,852 ETHERS.

 There are often days where the burn-up rate is higher than the new ETHER emissions.

 If the emmision is lower than the number of destroyed coins, it means that ETHEREUM is a strictly deflationary currency on that day, its total number of coins in circulation LOWERS.

If on a given day the average Gas price is on the level of 120 Gwei, such a day in practice means that it is a deflationary day.

Author: Marcin Żywica from ŻET Technologies

Miner, founder of ŻET Technologies, a company                                                                                  designing and manufacturing advanced crytpo miners.                                                                          ŻET Technologies provides computing power for blockchain                                                                  networks, creates technology for 21st century business.

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Transaction fees

Depending on the scalability of a given cryptocurrency blockchain, it may have different bandwidth, which translates into the ability to effectively add new transactions to blocks. Typically, when network traffic is moderate, transactions are added on an ongoing basis and the level of fees is relatively low. When the traffic in the network is increased, the network becomes jammed, as a result, users should increase the transaction fee in order to ensure a quick addition of transactions. Only transactions with higher commission will be handled by miners first. In the history of cryptocurrencies, we have had periods of increased activity several times. And so in the Bitcoin network it was a fever related to the record valuation at the turn of 2017/2018. At peak times, the cost of adding a transaction to the network could be as high as $ 50. The loudest boom in the Ethereum network was related to CryptoKitty, which overloaded the network for weeks.

The situation in the Etherum network

Currently, the level of fees in the Ethereum network is very high, the base block value is 2 ethers, currently salaries are in the range of 2.3-2.6 ETH. For a miner, this means an average income of 15-30% higher than the norm. The Ethereum development team noticed this phenomenon and started working on making the charging system more flexible. This is the essence of the motivation behind EIP1559. The point is that the transaction fee system in Ethereum is not optimal and promotes overpaying, and a way to improve this system would be to introduce a mechanism that would match the basic network fee to the network demand. As a result, the efficiency of the network fee level would increase and the degree of complexity of the part of the software present in Ethereum clients (wallets) responsible for estimating the correct level of network fees would decrease.

In the current system, a newly submitted transaction has to wait until it is included in the next block generated by the miner. Currently, the easiest way to guarantee a place in the next block is to increase the “gasPrice” parameter above the network average by this waiting transaction. A miner always tries to fill new blocks with transactions that will increase his remuneration, and a transaction with a high “gasPrice” meets this condition 100%.

The problem with such a system is that, at times of high demand, the level of network charges can quickly reach unreasonably high levels. When the blocks are almost full, users start bidding on “who will give more” and artificially inflate the value of the network fee just to secure a place in the next block. In order to minimize the impact of this phenomenon, miners have the option of increasing the number of transactions that can fit in the next block. However, this mechanism is not able to change very quickly. There is also a second fact. From the miner’s point of view, it is more profitable to settle for a small but full block than to increase the “gas limit” due to the increased risk of the appearance of “Uncle” (i.e. mining up an incomplete block). In particular, if the wallet prioritizes the inclusion of a block in the network within a short period of time, there may be times when you have to pay a network fee of several times the value of the transaction being sent.

To combat this, EIP 1559 introduces the concept of a “basic grid charge” which is to dynamically adjust in such a way that the total consumption of “gas” is to be set at 10 million. In addition, instead of ending up in the miners’ pockets, the “basic network charge” will be burned, which will destroy these coins irretrievably. However, it will be possible for the person sending the transaction to include a “tip” in it, which will go to the miner who concludes such a transaction in the block.

Alternative solutions for Etherum

Due to possible problems with the implementation of EIP 1559 for the current Ethereum wallets, which will therefore have to undergo significant changes, the developers have made a counter-proposal to EIP 1559. Dan Finley proposed an alternative solution called “Escalator”, which although it is very similar however, there are some important changes to the EIP.

The user, instead of ordering a transaction with a fixed fee value, creates an “escalating order” and specifies the maximum amount that he is able to pay for concluding a transaction in the next block. All orders are put into a queue of pending transactions, which in a predictable way increases the value of the fee at the same rate as other wallets / payment processors. Thanks to this, miners can still select the highest values from the queue of pending transactions. The main advantage of this solution is that the value of fees is determined in an efficient and predictable manner, and thus protects users from paying too high transaction fees.

High transaction fees and miners’ salaries

From the miner’s perspective, the state of increased transaction fees constitutes additional income and is welcome. After all, for the same work done, the miner will receive a higher salary. It is very important, if we want to take full advantage of favorable circumstances, it is worth checking whether the selected mining platform pays the miners commission from transaction fees or only the base remuneration for the creation of a new block. It is also worth checking what policy is applied in relation to prioritization in selecting transactions with an increased fee, it is appreciated that the pool tries to choose those with the highest fees. The only Polish Ethereum mining platform follows such a policy, consistently stating that both the base block reward and all transaction fees added to the block are 100% owned by miners working on the mining platform. There is a lot to focus on if the average value of the fees is the aforementioned 15-30% of the remuneration. Sometimes there are blocks of much greater value and such “gems” are most desired by miners today.

Author: Marcin Żywica from ŻET Technologies

Miner, founder of ŻET Technologies, a company                                                                                  designing and manufacturing advanced crytpo miners.                                                                          ŻET Technologies provides computing power for blockchain                                                                  networks, creates technology for 21st century business.

The post Why high transaction costs in Ethereum are good for miners? first appeared on ŻET Technologies.

The genesis of ProgPow

In May 2018, at one of the cyclically convened meetings by DevTeam (the team of developers responsible for the development of ETH), EIP 1075 was submitted, proposing to change the algorithm used to extract blocks in Ethereum. EIP (Ethereum Improvement Proposal) is a document that describes the proposed new features and processes. The new algorithm is intended to serve as a mechanism to block the dominance of ASIC machines in the network and allow miners with graphics cards to decentralize the network again.

To better understand the context, it must be remembered that Ethereum was created as a cryptocurrency based on the Proof of Work consensus, and the Ethash hash algorithm was to be a bastion of thousands of miners scattered around the world, basing their machine parks on the computing power of graphics cards. This has been the case for a long time due to Ethash’s high built-in memory requirements.

In practice, the construction of an ASIC-type computing system seemed impossible, but the need is the mother of the invention and such specialized devices began to appear on the market. Initially, Asic offered similar performance to graphics card-based miners, but over time their advantage began to grow to reach the current, 2-3x faster level. In this way, the original miners began to contest this state of affairs more and more often, demanding a solution to the problem.

Cryptocurrency mining rig equipped with graphics cards. ProgPow is intended to restore this type of device to the mining game.

The translation of these expectations into reality is EIP 1075 – the new proposal has been tentatively named ProgPoW (Programmatic Proof of Work). The goal was to design an algorithm that would use the full computing power, but at the same time in a balanced way all subsystems available in modern GPU graphics cards. This means that if the manufacturer of ASIC mining rigs wanted to create an efficient machine, its solutions would have to be competitive with the current graphics card manufacturers, i.e. AMD and NVIDIA. This would increase the design effort, reduce the performance imbalance between ASIC and GPU miners, and thus take ASICs away from their current dominant position. In other words, ProgPow is a proposal to permanently introduce the status quo in digital mining.

China vs the rest of the world

Centralization of ASIC manufacturing technology in China and unfair business practices applied by local companies pose a serious threat to network security, and thus the continued success of the project and the value of the ETH coin are at stake. As a rule, any manifestation of monopolization is harmful, in the case of cryptocurrencies, decentralization and dispersion are particularly important.

As the level of ASIC technology in China is ahead of the rest of the world by several years, eventually any currency with an ASIC-friendly algorithm becomes very dependent on centralized Chinese solutions over time. As a result, manufacturers of such devices, reaping the benefits of their privileged position, resort to various solutions.

There are often accusations that ASIC manufacturers release a new generation only when advanced work on the next generation of computing chips is achieved, or ASIC manufacturers do not allow customers to buy them until they develop much faster solutions for themselves. Only then do “new” devices go for open sale, allowing the rest of the world to buy their old equipment, which is doomed to be unprofitable right from the start. Another common practice is the cyclical release of updated versions of ASIC, usually enriching the name of ASIC with additional type designations: Pro, Super, Eco, +. These are actually the same computing chips, skillfully dosed and spread over time. In this way, every few months, hot premieres with more and more efficiency come to the market.

This technological race proposed by Chinese producers carries a very high risk. With the launch of the new generation, older models immediately lose their value, and rational planning of investments in digital mining becomes very difficult. The release schedule is one of the most closely guarded secrets of Chinese manufacturers.

The proposed changes under ProgPow are to equalize the computing power for all computational systems

In the search for a way to prevent the production of cheap and fast ASIC miners, cryptography experts have been looking for the optimal solution for a long time. One of the first ways was to use a memory-intensive algorithm. The logical conclusion was that since high-speed memory chips are expensive, ASIC miners equipped with large amounts of high-speed memory should be expensive, complex, and difficult to manufacture. The first practical implementation of such an idea was “Scrypt” used in Litecoin and Dodgecoin. The new algorithm provided resilience in the early stages of these currencies, but over time, Bitmain (the Chinese leader in asic chips) developed ASIC devices to mine Litecoin. The story was similar with other algorithms focusing on the strong use of one resource, which were assumed to be resistant to ASIC excavators. However, over time, mining of coins based on these algorithms was dominated by ASIC miners.

What does ProgPow offer?

This is where ProgPow comes into play, proposing 5 significant changes to the algorithm used by Ethereum:

1. Change from keccak_f1600 (62 bit) to keccak_f800 (32 bit)
2. Increasing the mixing state
3. Adding a random math sequence to the main loop
4. Force read from cache
5. Increasing the size of the read memory from 128 to 256 bytes

These changes take advantage of the strengths of graphics cards, forcing ASIC manufacturers to create multi-tasking graphics cards instead of cheap chips. Changing the keccak to 32 bits fits the word size used in current graphics cards, while the need to perform advanced mathematical calculations prevents the use of ASICs. Memory readings require I / O capability, and doubling the amount of memory required means more memory costs.

According to the simulations carried out, such ASIC would be only 20% faster than the equivalents in the form of graphics cards, at the same time more expensive, which would make the design and production of ASIC systems meaningless. ASIC’s natural advantages would be permanently eliminated and the market situation would normalize. This is the real importance of introducing ProgPow. Many commentators admit that such a solution would be optimal; on the one hand, high openness to various computational systems, on the other hand, a progressive algorithm involving many areas of computational units, which does not allow a particular type of system to obtain a significant advantage.

ProgPow – current status

The EIP 1057 proposal was conditionally accepted in April 2020 during the developer meeting number 81. As a result, we can expect the ProgPoW algorithm to be adopted in future updates, but we still do not know the exact date when it will happen. At the moment, a similar move has been decided by RavenCoin (RVN), which paves the way for the practical application of solutions used under ProgPow, and its original KawPow algorithm has been passing the test so far and evenly positions the streams of computing power flowing from various types of computing systems.

Author: Marcin Żywica from ŻET Technologies

Miner, founder of ŻET Technologies, a company                                                                                  designing and manufacturing advanced crytpo miners.                                                                          ŻET Technologies provides computing power for blockchain                                                                  networks, creates technology for 21st century business.

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