Zero “Gas Fees” —made possible only on the Internet Computer
If you are a Web3 or NFT enthusiast or a curious observer, one term you would have come across is definitely “Gas Fees” and the memes like this one
So what is Gas Fees?
Everything has a price in the world — be it in the form of tax, service fees, subscription fees etc. In the Web3 world, it’s classified as “Gas Fees”. The blockchain networks run on distributed nodes, and this decentralized infrastructure is kept safe and secure by some heavy duty computing. There is a cost of running this operation, which is called “Gas Fee”. Every time you write to the blockchain, there is a gas fee to validate it for which the user has to pay. For example, while purchasing an NFT, there is the price of the NFT + Gas Fees.
What are the problems with this model?
Sounds pretty simple and straightforward, however there are 3 problems in the way it runs:
- The gas fees is not fixed, it is variable and highly volatile. The fee depends on the load on the blockchain at that point in time. Gas fees can range anywhere from $30 to $300 in general, and in recent transactions over $6000 as well.
- Due to the load, the gas fees is sometimes more than the value of the transaction running into 1000’s of dollars per transaction. Imagine trying to buy an airline ticket online with a cost of $100, and when you go to checkout the cost goes up to $1000.
- It doesn’t work for any dApp that wants to scale up as every time the traffic goes up, the speed goes down and the gas fee goes up. Imagine playing an online game with thousands of players, but for every action you have to wait 30–40 seconds & the fee keeps going up.
A recent case study of YugaLabs minting land sale on Otherside using the Ethereum backend is a perfect example of the reality of these problems. People had to pay up to $6000 as Gas Fees per transaction. Etherscan data suggested that people have spent more than 64,700 ETH (more than $183 million) on transaction fees for Otherside NFTs alone.
How is the Internet Computer structurally different?
Ethereum runs on a system of global consensus, so it runs slowly & it’s expensive which is ok for applications like Defi, however one cannot easily run websites or play games directly on Ethereum. The Internet Computer is built on a different principle of canisters loaded with cycles(gas), which enables it to run fast, host websites, games, complex enterprise systems, and also improve safety of DeFi based services. The Internet Computer is also significantly cheaper for the end user than Ethereum due to its Reverse-Gas Model (free to access a resource, developer pays to host it).
What is the Reverse-Gas Model?
The Internet Computer has inverted this model using a “reverse-gas model.” It is very similar to the model we are used to in the Web2 world i.e. users don’t pay for using Facebook or Youtube, the cost of running is borne by the organisation running the service.The reverse gas system is similar — instead of passing on the cost of doing a transaction on the blockchain to end-users, it is covered by the dApp developer. They preload their application (hosted, in ICP parlance, in a “canister”) with Cycles, the currency of computing on the ICP platform.
No gas fees for the end-user
Users can finish the transaction without having to be subject to gas fees. Even if the cost of the reverse gas fee goes up, it isn’t passed onto the end-user but instead becomes an operating cost for the developer. So whether the user is minting an NFT, using a DEX, or engaging on SocailFi or the Metaverse, there is no upfront fee loaded for the users.
What possibilities open up with this model?
The whole infrastructure of ICP, including the reverse gas model is designed to allow blockchain innovation to thrive and for the user adoption of blockchain to be frictionless. For example — it allows applications like Social Media, Gaming, enterprise solutions, which need huge numbers of users for making it scalable to be built with the decentralized benefits of blockchain. The possibilities are endless which is visible in the ever growing ecosystem of dApps on the IC.
Is ICP trying to be an Ethereum Killer with this approach?
Absolutely not! Dominic Williams, Preseident & Chief Scientist at Dfinity has repeatedly stated that The Internet Computer is not, and was never intended to be, nor has ever been sold as, an “Ethereum Killer”. There are different capabilities of both the protocols and the objective is to strengthen the whole ecosystem, not try to kill one another. For example, with the way Ethereum is built, a GB of smart contract data can cost about $100,000,000 on Ethereum, it’s not designed to be a solution for files that are large in size, so when you buy an NFT using $ETH, the smartcontract is on the blockchain, but the asset itself is on a central server. On the Internet Computer, you can expect that to be below $5 /GB per year which makes it possible to build the entire infrastructure including storage on the blockchain. The ICP <> ETH integration will provide these decentralized capabilities to smart contracts running on Ethereum which will overall benefit the ecosytem.
The reverse gas model is an approach to onboard more and more users to the benefits of dApps running on the blockchain, eventually moving a mass of users from BigTech on Web2 to similar decentralized services on Web3. This graphic shows how this movement is starting to take form on the ICP.
