Spreadsheet of validator requirements and network performance.

❓Why are Ethereum fees expensive❓

What makes Solana, Polygon and Avalanche cheaper?

Three key factors:

-> Bandwidth (validator internet speed)

-> Computing power

-> Supply vs Demand

Here's an explainer with examples:

🔹Blockchain = database where you pay to add data

-> Making a transaction means adding data

-> Transactions are processed in batches (blocks)

-> The time between blocks is the "block time"

-> Each batch is limited in size, called "block size"

♦️ An example for Ethereum

- The average batch size is 70 kB (kilobytes)

- Batches of transactions happen each 12 seconds

So:

-> Processing rate = 70 kB / 12 s = 6 kB/s

-> This is about 15-30 transactions per sec

🔹Average processing rates for major chains:

-> Solana: 3,000 kB/s

-> Polygon: 25 kB/s

-> Bitcoin: 2 kB/s

-> Ethereum: 6 kB/s

-> Avalanche: 0.6 kB/s

We'll go through each one by one.

First, a look at "Bandwidth" and "Computing power".

♦️ Bandwidth ~ Processing Rates ~ Internet Speed

- A network of computers processes each blockchain

- These computers are called "validators" or "nodes"

- Validators communicate over the internet

So, processing rates are limited by internet speeds.

🔹Validator computing power limits processing rates

Recommended validator/node requirements, GB RAM:

-> Solana: 256

-> Polygon: 32

-> Bitcoin: 2

-> Ethereum: 32

-> Avalanche: 16

🔹Summary of transaction fee economics

Transaction fees depend on supply + demand

All else equal, blockchains with:

- Higher processing rate capabilities have lower fees

- Less people using them have lower fees

Let's apply this to blockchains one by one.

♦️ Why are Solana transactions cheap? (<$0.01/tx)

Solana requires validators to have:

-> Very fast internet

-> Lots of computing power

Drawbacks:

- Solana crashes frequently

- Validators are few in number and specialised

🔹Why is Ethereum expensive? (>$1/tx)

- Low validator internet speed requirements

- Moderate validator computing power reqs

Benefits:

-> The network has never crashed

-> Lots of validators

Drawbacks:

- Slow network processing relative to demand

- High transaction price

♦️ Why are Bitcoin fees expensive (>$1/tx)

Very loosely, it's the same situation as Ethereum.

(I won't get into the ETH/BTC centralisation debate)

🔹Why is Polygon cheap? (<$0.1/tx)

More supply: Faster processing rates

- Higher minimum validator internet speed

Less demand: Transactions are valued less

- Fewer validators than Ethereum + more crashes

♦️ Why are Avalanche fees moderate (~0.1/tx)?

Similar situation to Ethereum but:

- Demand for network transactions is lower

❊ In Summary

Ethereum fees are high because:

- Validator computing power requirements are low

- Internet connection requirements are low

This allows for:

+ More people to run validators

+ Lower chance of the network crashing