• With a new protocol, EY tackles Ethereum’s gas fee problem

  • On Thursday, accounting services firm Ernst & Young (EY) published Nightfall 3, a collection of tools aimed at lowering Ethereum blockchain fees without sacrificing privacy.

    The Nightfall 3 protocol, like its predecessor ‘Nightfall’ from 2019, is used to manage Ethereum transactions privately. EY’s most recent form is known as a “ZK-Optimistic Rollup” protocol because it combines zero-knowledge proofs with an Optimistic Rollup transaction verification mechanism.

    Zero-knowledge proofs rely on cryptographic techniques to ensure that a piece of data transported across the blockchain includes the correct type of data without disclosing it. Nightfall 3 bundles ZKP transactions into ‘rollups,’ which are referred to as ‘optimistic’ because they are all considered to be real unless otherwise proven. This eliminates the need for validators to validate transactions, cutting expenses.

    By processing Ethereum transactions outside the main blockchain, rollups alleviate Ethereum’s scalability bottleneck (currently only capable of processing roughly 15 transactions per second). The transaction verification process is moved to a ‘sidechain’ known as ‘Layer 2′, which interacts with the main blockchain, or ‘Layer 1′, on a regular basis to slot in the processed transactions.

    Users are incentivized to rectify incorrect Layer 2 blocks through a procedure that is arbitrated by smart contracts, ensuring that only proper Layer 2 blocks are put into Ethereum’s blockchain.

    Ethereum uses a gas system because various transactions need varying degrees of work and so can have significantly changing gas prices. Simple token transfers cost a little amount of gas—21,000 gas to be exact—but transactions involving many, sophisticated smart contract executions can cost up to 100,000 gas. EY claims that their new protocol reduces transaction fees to around 8,200 gas, or “nearly one-eighth of the cost required to make a typical, public ERC20 token transfer.”

    “Based on EY experience, ZK-Optimistic roll-ups are currently among the most effective in balancing security incentives and mathematical efficiency for conducting private transactions on the public Ethereum network,” Paul Brody, EY Global Blockchain Leader, stated in a news statement on Thursday. We’re releasing this code into the public domain once again, as we have in the past, in order to accelerate enterprise adoption of this technology.”

    For years, Ethereum users have been concerned about the rising cost of Ethereum transactions. Ethereum transaction fees were also at an all-time high of $69.92 on May 12, when the currency reached its highest ever price of $4,164. Although average transaction rates have now dropped to $3.04, according to BitInfoCharts, there are still concerns that another surge in demand would result in rising transaction fees.

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