Can cryptocurrency fees disappear? Web3 makes transactions easier

Can cryptocurrency fees disappear? Web3 makes transactions easier

If you have ever used or played with cryptocurrencies, you are no stranger to gas fees. These charges are a necessary hurdle that crypto users must pay in a blockchain’s native coin to process transactions or execute smart contracts. However, they have become a significant limitation to the scalability of Web3 platforms, and we need a solution to overcome it.

The Ethereum blockchain's gas fees can reach hundreds of dollars when network traffic is high, making it extremely costly to transfer money on the blockchain compared to traditional banks or payment platforms. Even on a good day, you will have to consider at least a few dollars to do something on-chain.

But there's good news - account abstraction can enable users to pay gas fees with any payment method, pay someone else's gas fees, or invite someone else to pay theirs. This development unlocks many new possibilities for Web3 users and cryptocurrency in general, revolutionizing how they operate and simplifying life for people stepping into the world of crypto for the first time.

How Gas Fee Abstraction Works

Account abstraction is a revolutionary feature that simplifies paying gas fees on various blockchains. In the past, users had to manage gas fees directly, which often led to higher costs and increased transaction complexity. However, with account abstraction, users can pay for transactions using tokens issued by the dApp they want to use without worrying about holding multiple native tokens solely to cover various gas fees.

Moreover, dApps can pay for fees themselves, offering "no fees" to their users. This technology has immense potential for the broader adoption of Web3 and enables new use cases and user experiences.

Wallet and payment providers have introduced options to leverage account abstraction, providing users with the most accessible, secure, and powerful Web3 gateway. For instance, crypto exchange OKX offers an account abstraction-powered Smart Account feature in its wallet, which enables users to pay for transactions on multiple blockchains using stablecoins. Trust Wallet has also launched the beta version of a new SWIFT smart contract wallet powered by account abstraction, which accepts over 200 tokens for gas fees and offers discounts for using the TWT token.

Even the Card payment network Visa has been working on a solution to allow users to pay gas fees directly in fiat money using a Visa card. This would use Ethereum’s ERC-4337 standard and a paymaster contract, making the process even more convenient for users.

Ethereum’s Dencun upgrade

The Ethereum Foundation announced updates to the ERC-4337 standard on January 10 to boost the accuracy of gas fee estimation and minimize costs. The update, Dencun, is now complete as of March 13. It enables the creation of customizable Web3 wallets with features that include subsidized gas fees, spending caps, multi-signature transactions, contract and account whitelisting, gas efficiency improvements within rollups, and embedded privacy.

According to Matt Cutler, the CEO of Blocknative, in a Blockworks podcast, "account abstraction is probably the most significant upgrade to the user experience on Ethereum ever seen in the history of the network." "Account abstraction adds a new layer on top of everything else... What smart contract wallets do is, instead of a user signing transactions, a user expresses their intent."

Swapping one token for another is just one example of an intent that can be expressed through the advancements in blockchain technology. With the ability to pay gas prices in ERC-20 or off-chain assets like credit card points or miles, a new class of builders called a 'bundler' has emerged. These bundlers roll user intents into a large transaction and submit it to the network via alt mempools. This innovation allows for more powerful wallet experiences and presents new possibilities and threats to the network's core. The renaissance of wallet innovation is necessary, and considerable room exists for further development.

Why Abstraction is a Game Changer for Web3 Apps

In a meta transaction, someone other than the user must pay the gas fees, significantly simplifying the user experience. This allows for using payment methods other than the native coin, making engaging with decentralized finance (DeFi) protocols, gaming, and trading easier. By adopting abstraction, users can enjoy a consistent transaction experience across blockchains without worrying about calculating and paying gas fees. As a result, it is possible to offer a Web2-like transaction experience while operating on Web3, as Cutler rightly pointed out.

Artists who want to reward their fans with exclusive experiences via non-fungible tokens (NFTs) cannot rely on their fans being crypto-savvy and having a wallet. Instead, they should collaborate with platforms like Spotify that offer account abstraction wallets, where the fan's credit card number is used as the wallet. By associating a private key with the credit card wallet, an NFT can be dropped into it, used to access VIP areas, or sold, shared, or leveraged. The rise of intent-based wallets is imminent, and most users will transition seamlessly into them without even realizing the change. The new technology, enabled by Web3, will simplify the supply chain and open up a world of possibilities for artists and fans.

The next billion users will come from bottom-up organic growth or viral applications that bring them into the ecosystem. Alternatively, it will be through top-down inorganic growth where we meet users where they already are, such as existing credit cardholders or brokerage account holders. With account abstraction, these familiar and commonly used applications will gain superpowers and become conversant, usable, and secure in the Web3 environment.

The community has started to see changes

The recent Dencun upgrade and the deployment of EIP-4844 have had a remarkable impact on transaction fees across various Layer 2 (L2) networks. This progress signifies a significant step towards addressing the issue of high transaction costs within the Ethereum ecosystem.

Several L2 networks have witnessed a considerable reduction in transaction fees. Optimism and Base reported an average transaction fee of $0.05 and $0.064, respectively, with a median fee of $0.0038 and $0.0008. Similarly, Arbitrum and zkSync Era have also experienced reduced fees, with Arbitrum reporting an average fee of $0.5 and zkSync Era registering an average fee of $0.161.

Jesse Pollak, the Head of Development at Coinbase, took the time to go to Twitter to highlight the impact of these changes. He noted that the Coinbase L2 Network Base previously cost $0.31 per transaction but has now decreased to a mere $0.0005. This substantial reduction in fees underscores the positive effects of the recent upgrades on transaction affordability and accessibility.

Starknet, a significant L2 network, has synchronized with the Dencun upgrade, substantially dropping gas fees. The network's official Twitter account shared a screenshot revealing that gas fees on the network have dropped to a mere US$0.01-0.04 per transaction, down from the previous $2. This represents a significant decrease of 99% in gas fees on Starknet.

The Bottom Line

Blockchain technology's future is hindered by the complexity of wallets and the high cost of gas fees. However, by burying transaction fees out of sight, we can reduce barriers to entry for non-technical users and foster increased accessibility and broader adoption. This will undoubtedly drive Web3 adoption, allowing users to engage seamlessly with a wider range of decentralized applications without being concerned about transaction fees. Holding various cryptocurrencies purely to cover gas fees will no longer be necessary, allowing users to participate in specific projects like gaming or NFT collections easily.