Ethereum governance put forward a proposal on Feb 26 for removal of gas refunds, because of their negative effects on the blockchain. It was authored by Vitalik Buterin and Martin Swende. There is a high likelihood that EIP 3298 will be implemented in the London hardfork.
The news had an obvious negative effect on the price of the gas tokens primarily Chi Gastoken. CHI has fallen down by 23.8% in the last 2 weeks, upon news of it’s impending demise.
What Are Ethereum Gas Tokens?
The activity on the Ethereum network requires “gas” – fees paid to miners to process transactions. Now, this gas can be variable, as different activities consume different resources, based on their complexity and priority.
Gas tokens are Ethereum smart contracts that convert gas into tokens on the blockchain. It becomes possible for users to create these tokens, when the gas price is low and spend them, when the gas price rises.
They enable the storage refund mechanism in Ethereum for contract transactions. They also provide the SELFDESTRUCT – an EVM level opcode, which provides a refund to users. If the storage variables or elements are deleted, helping nodes manage state size and save space.
It’s useful for storing gas to save fees during high Gwei hours, but it ensures enhanced state sizes (as contract executions are increased to mint gas tokens), clogged up blockchain uses gas inefficiently and increased block size variance.
How Has The Fees Reacted?
Ethereum network fees have reacted positively, since the announcement on Feb 26. Since they will soon become redundant, gas tokens have fallen in popularity and usage. This has ensured that meaningless contract executions are lower than usual.
It can be seen that gas prices have gone down since Feb 26. They actually stayed consistently below 100 Gwei for quite some time, before rising above on Mar 09.
However, some analysts disagree with the conclusion and associate the gas price decline to the fall in ETH price. It remains to be seen as to double-digit Gwei levels are sustainable. This would happen once the ETH price rises to the previous ATH levels.