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Comment by roel_v | Hacker News Reader

Maybe this is a good time and place to ask - let's say I want to buy something using Ethereum. Is it correct that when I look at, say, https://ycharts.com/indicators/ethereum_average_transaction_... , you have to pay USD 20 just as payment fees? I wrote off Bitcoin as a payment mechanism a long time ago because of this (although it seems BTC tx costs are now lower than ETH?), is this the direction tx costs for all crypto coins go?

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To directly answer your question: currently, ethereum has the same fundamental scaling problems that bitcoin has (limited global throughput)

Bitcoin's attempted solution on this front is off-chain scaling via lightning network. As far as I can ascertain, this has had highly limited adoption.

Eth's attempted solution on this front is sharding. I can't claim to be an expert in this, but from my understanding after proof-of-stake is deployed, ethereum plans to deploy something like 64 separate "shards" which, from my understanding, are like extra blockchains for conducting transactions, and using some kind of complicated proof of stake system to keep it consistent. In this case, while the main-net still has limited global throughput, scaling up to add more side chains will allow scaling additional throughput. You can read more here https://ethereum.org/en/eth2/

As with lightning, we don't know how well this will actually end up going until it's deployed.

Eth has a sidechain called Polygon with orders of magnitude more usage than bitcoin's lightning network. There are a number of other promising "scaling solutions" launching in the coming weeks. Sharding is unlikely to happen in 2021.

Ethereum has set aside sharding temporarily to focus on PoS. The plan to scale in the short-term is to use technology called "rollups" which put a transaction's signature data off-chain while keeping its data on-chain, effectively "batching" a bunch of transactions into one.

https://ethereum-magicians.org/t/a-rollup-centric-ethereum-r...

> Eth's attempted solution on this front is sharding

sharding + L2 rollups*

For a basic transfer, it's probably best to use a gas tracker like: https://etherscan.io/gastracker to check on costs. It's about $6-8 at the moment. The average tx cost is going skew much higher because of DeFi transactions. Uniswap V3 is scheduled to deploy on Optimism potentially in a few weeks which may help alleviate fee pressure (although as you can see from the linked gas tracker, Uniswap V2 is still consuming a large portion of txs). The bet is that a combination of L1 and L2 improvements will bring transaction fees back to reasonable levels in the next year or so. If it doesn't, there are a host of new competitors like Algorand or Solana that are looking to supplant Ethereum (and do currently provide much higher transaction throughput and lower costs).

In general, fees go up as the token price goes up since fees are usually charged as a function of transaction size or complexity, and also fees rise as a protocol hits its tx limits, but not always. Nano is an interesting cryptocurrency that is fee-less (although they just had to roll out an emergency update to improve spam resistance), so it's possible to design a fee-less system, but it's certainly even more experimental atm.

There are, however a number of cryptos that currently (and by intent) have <$0.01 (sometimes significantly less) fees. This includes (just going down by market cap): Ripple, Bitcoin Cash, Stellar, or Dash. For transactions, even though fees are a bit higher (about $0.06), I like Monero since it's one of the most private and widely used cryptocurrencies out there, and it's fees have actually significantly decreased due to technical improvements in transaction efficiency, dynamic blocksize, and an algorithm that can actually reduce fees as volume increases.

That is correct, to run an on-chain transaction is fairly expensive. There is a lot of ongoing work to address this: Layer 2 solutions like optimistic rollup, arbitrum, etc. EIP-1559 itself will address this problem on layer 1. But the ecosystem is not mature yet. If/when the scaling problem is finally solved, the legacy financial system will change rapidly.

> EIP-1559 itself will address this problem on layer 1.

1559 addresses fee stability and will help reduce fee spikes. It's purpose is not to reduce fees in general.

$20 is a little high. ETH transactions are variable cost; more complex transactions cost more. In order to get the price of a simple transfer you can take the current gas price (for example, from https://ethgasstation.info/index.php), which is 87 right now, multiply that by 21000 (cost in gas of a transfer) and divide that by 1 billion. So a transfer costs 0.001827 ETH or ~$6 if you want to happen within a few minutes.

So yes, it's currently not practical for microtransactions.

If I want to keep my fees less than 5%, I wouldn't call $100 a "micro-transaction". People don't like paying more, for fun.

That chart is highly misleading, as it includes all smart contracts. In ETH a basic transfer (like BTC) is often cheap (although it needs to be even less!), however interacting with a smart contract can be more expensive. If you want to interact with a highly complex smart contract that pulls a lot of state it can be 100x the cost of a basic transfer... just depends on the code.

No, there are coins like Bitcoin Cash that have ridiculously low fees and are accepted in tons of physical stores across the world.

BTC refuses to scale, Lightning is permanently broken.

Ethereum will reduce the fees with sharing, but that will take time.

> in tons of physical stores across the world.

Compared to other crypto, or on the scale of Visa and MasterCard?

Is this really your question?

I mean, yeah. I’ve seen Bitcoin-accepting shops once or twice in my life. But the parent claimed “there’s a ton”, so I was wondering where I can find those.

Just to put an anecdote to the question, I made a withdrawal from my mining pool to my wallet 2 days ago and for an nearly instant transaction it cost me ~$2USD. Higher than I'd want in any currency, but it definitely wasn't $20USD

Strange. I made ~5 ETH transactions a few days ago (interacting with a smart contract) and paid ~$90 each. Around the same time I made a few transfers, and spent about $25 each.

Yeah gas fees have been all over the place, and smart contract interaction can be really $$$

It's cost per transaction. Transactions can have multiple endpoints, so the tx fee is split up between many different users.

If you check the incoming transaction ID I'm sure you'll see it contained many many endpoint wallets.

That's how mining pools offer free withdrawals periodically. If you split it up amongst 100s of users, per user tx cost is very low.

Nobody knows whether or not cryptocoins are currencies of the future but I'm certainly willing to let them innovate for the next few decades figuring out if there's a path forward.

However, I cannot abide by a money speculation mechanism which uses as much electricity to mine worldwide as the Netherlands use in total. That's absolutely asinine to me.

> I wrote off Bitcoin as a payment mechanism a long time ago because of this (although it seems BTC tx costs are now lower than ETH?), is this the direction tx costs for all crypto coins go?

No. There are developers who actually prioritize on-chain scaling. For instance Bitcoin Cash and Monero have very cheap fees, and they will stay cheap for the foreseeable future.

Yep. Not much, if anything, has improved since you wrote off Bitcoin. One of the problems is nobody really cares about having a new payment mechanism. You can explain fractional reserve banking to people, explain how the 2008 financial crisis happened, even give small scale advantages like sending money overseas, and the vast majority of people just don't care. Until people start caring, nothing will change, and crypto will remain a zero-sum pyramid scheme.

Not sure how it all works, but I assume it's broken down for a purchase on something like Coinbase card - eg. they bundle a load of card transactions into a ETH to fiat conversion for Visa

https://help.coinbase.com/en/coinbase/trading-and-funding/ot...

An entire month's worth, in fact! In practical terms, you pay for things in fiat and then cryptocurrency is sold to cover your credit card bill.

https://mempool.space/

As of writing, a Bitcoin transaction costs $4.76.

The last time I received a Bitcoin payment, it cost $0.36 in network fees. The network is currently more congested, so the fees are higher at the moment.

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