Ethereum creator Vitalik Buterin has proposed ‘EIP-4488’ to reduce rising gas prices on Layer 2 networks.
The proposal reflected his strong advocacy for Layer 2 rollups as the most trustless scaling solutions for Ethereum.
Ethereum Layer 2 solution Loopring’s native token LRC pumped 17% in response to the returning bullish sentiment around Layer 2 protocols.
JAIPUR (CoinChapter.com) – Loopring (LRC), an open protocol for building high-performance, order book decentralized exchanges on Ethereum, rallied Monday as markets’ focus turned to Ethereum’s co-founder Vitalik Buterin’s proposal to reduce transaction costs on rollup-based Ethereum layer 2 networks via EIP-4488.
In detail, the LRC price rallied over 17% on a 24-hour adjusted timeframe, stepping away from its 30%-plus price correction that occurred from the local high of $3.80.
Decreasing Transaction Calldata
Transactions costs on Ethereum and associated layer 2 rollup networks have spiked through the roof. Optimism and Arbitrum facilitate 3-8 times cheaper transactions than the base Ethereum network, while zk-Rollups reduce transfer costs by 40-100x.
Nonetheless, scores of users still find the current gas fees on both rollup layer 2 networks. Philippines-based Micah Zoltu observed the same in the official Github pull request. Also, Zoltu suggested a “short-term solution” to reduce transaction prices on rollups further.
“However, data sharding will still take a considerable amount of time to finish implementing and deploying. Hence, a short-term solution to further cut costs for rollups, and to incentivize an ecosystem-wide transition to a rollup-centric Ethereum, is desired.”
EIP-4488 — the proposed solution — if activated, would considerably reduce layer 2 gas fees by decreasing transaction call data cost for Optimistic and zk-Rollups. It would also put a cap on information regarding layer 2 transactions that can be entered in a block.
But There’s A Catch
However, the upgrade would result in an increment of the average block size, which is a security concern.
“Simply decreasing the calldata gas cost from 16 to 3 would increase the maximum block size to 10M bytes. This would push the Ethereum p2p networking layer to unprecedented levels of strain and risk breaking the network; some previous live tests of ~500 kB blocks a few years ago had already taken down a few bootstrap nodes.”
But the Buterin, Dietrichs, and Zoltu trio allayed network breakdown fears of the Ethereum community by issuing a “decrease-cost-and-cap proposal.” The same would lower costs for layer 2 transactions and would not put necessary stress on the network. Additionally, the block size would have a 1.5 MB ceiling without proving to be a security roadblock.
EIP-4488 would essentially be a “backwards incompatible gas repricing” and requires a “scheduled network upgrade.” However, users would be able to continue interacting with layer 2 networks without interruptions. On the other hand, Miners would have to “stop adding new transactions into a block when the total calldata size reaches the maximum.”
But there’s a way around the rule.
“…if a block fills up to the size limit, they could repeatedly remove the last data-heavy transaction and replace it with as many data-light transactions as possible, until doing so is no longer profitable.”
Loopring Stoked Bullish Vibes
Overall, the latest Ethereum Improvement Proposal painted a bullish picture for the layer 2 rollup ecosystem. That, in turn, reignited buying and short-term investment sentiment around Loopring’s native token LRC, especially since the zk-Rollup network facilitates the cheapest transactions.
Transaction prices on rollups would significantly reduce after EIP-4488 making layer 2 rollups all the more relevant, the Loopring team said.
LRC pumped 17% in response while building on the uptrend that took shape on November 1.
Although the token experienced a selloff after the upside move, bullish sentiment is still intact. As a result, traders anticipate a retest of LRC’s last all-time high. The resulting price action would form an Ascending Triangle pattern, a textbook bull setup, followed by an upward breakout towards $6.2, a 53% rally from current prices.
The relative strength index (RSI) indicator supports the said bullish bias due to neutral market conditions on the 4-hours chart.
Himadri is an active investor in cryptocurrencies and upcoming blockchain technology projects. He has been a part of the digital asset space since 2017 and has held multiple positions as Social Media Manager, Assistant Editor, Sponsored Content Manager, Cryptocurrency Journalist roles in reputed news outlets like NewsBTC, Bitcoinist and CryptoPotato. He has also helped numerous blockchain projects gain prominence through terse and succinct marketing/technical content. Himadri comes with a marketing and engineering background, and has worked with reputed names such as GE Healthcare, Volvo Trucks and Polycom before moving into crypto.