In Ethereum, Gas War means a competitive situation where senders compete for gas fee to get their transactions executed in priority. Since, Ethereum transactions are auctioned to the highest bidder, the bidding results in spiraling up of bids which eventually results in a unsustainable gas price.
Why Gas Wars Take Place?
Ethereum never worked earlier on increasing its transactions speed because it thought doing so might reduce the security of the blockchain.
This caused its transaction speed to remain stagnant at 10-15 TPS.
However, this could not match the growing demand of the time and soon people had to wait un queue to get their transactions executed. Those who paid a higher fees got their transactions executed first.
The only reason why Gas Fees are still high because most users prefer Ethereum for its security.
During times of increased demand for transactions such as during airdrops, during NFT minting, or launch of popular DApps, the competition for gas increased to become Gas Wars.
Need of Gas in Ethereum
In the Ethereum Blockchain, gas is used to estimate the amount of work done by validators to verify transactions. The higher the work needed, the higher will be gas fees.
Work is required to execute operations such as sending transactions, deploying smart contracts, or interacting with decentralized applications (DApps).
For example, NFT transactions need higher work to validate them and therefore have a higher gas fees than Ethereum.
What is Ethereum doing to avoid Gas Wars?
Gas wars present a brutal scenario where small transactions are not economically viable because several times the transacted value is much lesser than the gas fees.
Therefore, to reduce Gas fee, users use two methods to decrease transaction costs. They are Zero Knowledge Rollups and Optimistic Rollups. Both these processes rely on off-chain work which might compromise Ethereum’s security.
Ethereum has also currently implemented a third way called Proto-Dank Sharding which helps reduce its dependency on other blockchains.
Zero Knowledge Rollups
Though Ethereum has not done much until 2024 for decreasing pressure on Gas Fees, other blockchains presented them as Layer-2 scaling solutions and helped offload the pressure on Ethereum by validating Ethereum transactions out of the Ethereum blockchains and submitting a summary of these transactions.
When the summary is found to be true, all the transactions are also validated at the same time because the final state of the blockchain after the transactions is as expected.
The entire process is known as Zero Knowledge Rollup because only the summary of transactions are kept and individual transaction details do not exist on Ethereum and it has no knowledge of the off-chain (Layer-2) transactions.
Optimistic Rollups
Optimistic Rollups also summarize transactions and only submit a summary of them for validation by Ethereum. But, there is a small difference between Zero Knowledge and Optimistic Rollups.
Optimistic Rollups use call-data where the individual transactions (of the summary) are written. Call data is a space on the Ethereum block which is not validated by validators.
This process decreases the transaction costs but also makes the blocks bulky because all the individual transaction data is still present inside the block.
Proto-Dank Sharding
Proto-Dank Sharding is a process where a feature called a “Blob” is attached to each block and this blob stores all the individual transaction data. The blobs do not make Ethereum blocks heavy because each blob in a block is deleted after 3 months of creation.
This is different than Sharding which aims to increase the speed of Ethereum by dividing its 900k validators in to smaller groups each of which can independently verify transactions and add blocks to Ethereum.