Understanding the Gas Fees That Affect Filecoin Miners’ Profits

Recently, the issue of high gas fees has sparked heated discussions in various communities. What is the gas fee? How does it relate to us miners? Today we will talk about Filecoin's gas fee.

The following figure shows the trend of Gas Fee in the past 30 days. (Note: The figure shows BaseFee, the actual Gas Fee is BaseFee*the amount of Gas used)

The Gas fee was first proposed by Ethereum and consists of two parts : the base fee (BaseFee) and the additional fee (GasPremium) .

Gas is literally translated as gasoline. In short, Gas fee is "gasoline fee". For example, we need to refuel our car before we can use it, and gasoline will be consumed during the use of the car. The longer the driving distance and the more difficult the road, the more fuel will be consumed. We can understand Gas fee as the fuel of blockchain .

Filecoin introduced the Gas proposal of Ethereum EIP1559, and implemented it in the Filecoin network after slight changes. (Note: Gas fee consists of two parts: Base fee (BaseFee) + surcharge (GasPremium). The Base fee will be completely destroyed, and the surcharge will be rewarded to the miners who package the message.)

This mechanism can algorithmically predict the market price of Gas. EIP 1559 uses a difficulty adjustment mechanism similar to Bitcoin to increase the value of BaseFee. When Filecoin's network utilization rate is higher than 50%, BaseFee will increase; when it is lower than 50%, BaseFee will decrease. When transactions need to be accelerated, users can achieve the purpose of accelerating transactions by paying tips.

In addition, the destruction of BaseFee provides a deflation mechanism for Filecoin, reducing the circulation in the market, enhancing the scarcity of FIL, and ensuring the price of the currency.

The gas fee consumption of Filecoin mining is mainly in three aspects:

Filecoin generates revenue for honest miners through block rewards and service fees, while also incentivizing miners to provide quality services through staking and forfeiture mechanisms.

First, it is difficult for miners to increase computing power.

Mining requires continuous sealing of sectors to achieve computing power growth and obtain block rewards. In this process, miners themselves need to submit various messages to the blockchain network, such as proof of replication, proof of time and space, etc., which consumes a lot of gas fees.

If the message cannot be packaged in time, the miner will be punished and the pledged Filecoin will be deducted. In order to ensure that the message is packaged, the miners must send messages to the chain even if the network is congested, and even increase the gas fee of the message to speed up. Just like the current high BaseFee, miners still have to submit time-space proofs because of Filecoin's penalty mechanism, even if they have to pay a sky-high handling fee. This undoubtedly increases the cost investment of miners in the mining process and raises the threshold for Filecoin mining.

Moreover, when the gas fee is high, miners have to postpone sending messages and increasing computing power, which is also not conducive to the development of Filecoin.

Second, this mechanism results in the miners who pack the blocks not making any money.

In EIP1559, the transaction fee is divided into base fee (BaseFee) + additional fee (GasPremium), of which the base fee BaseFee will be directly burned and destroyed, and currently this part accounts for too large a proportion.

There are two aspects of miner income. In addition to the block rewards we just talked about, there is another part, which is the income from service fees. Packing miners earn this part of income. However, due to mechanism reasons, most of the gas fees are used for destruction. Even in the current situation where gas fees have risen so sharply, packing miners still cannot make money. Miners have no enthusiasm, and miners who need to pack have to continue to raise prices, causing congestion on the chain. Gas fees and slow transaction processing time continue to form a vicious cycle, resulting in a continuous increase in gas fees.

Third, it will cause Filecoin to deflate too quickly.

The destruction of BaseFee creates a deflationary model for Filecoin, enhances the scarcity of the FIL token, and distributes benefits to all FIL holders.

However, the total amount of Filecoin (2 billion) is constant, and Filecoin itself has a strict mortgage mechanism and release mechanism. Most FIL is in a locked state for reproduction.

Filecoin has a large base of miners and is currently in its early stages. The FIL market demand is huge, and supply is already less than demand. If the gas fee is still so high, and most of the gas fee is used to destroy, it will accelerate the deflation of Filecoin, resulting in insufficient circulation in the market, an imbalance between supply and demand, and difficulty in meeting the requirements for pre-collateralization of new sectors, which will lead to an increase in the price of the currency.

On November 20, 2020, Filecoin official member Jennifer announced in the Slack channel: Lotus V1.2.0 has been released, and miners need to upgrade to this version before the block height reaches 265200 (approximately 07:55 Beijing time on November 25, 2020). This version implements the FIP-5 proposal, removes the expensive miner reward attribution calculation from PreCommitSector and ConfirmSectorProofsValid, and will greatly reduce the consumption of Gas fees, release chain bandwidth and reduce miner costs. The Gas cost of WindowPoSt can be reduced by up to 200M. In addition, Specs-actors and proofs have been upgraded.

The official team of Filecoin is also listening to the voice of the market. Now FIP-5 has been implemented in Lotus. Judging from the data, it did have some effect at the time. But later, the gas fee rebounded again, and even almost caught up with the number of mortgage coins.

In addition to reducing gas fees, increasing miners' income is also an effective way to promote the positive development of the Filecoin network. Most of the gas fees should be distributed to miners who can package data, so that miners can see the benefits and stimulate the enthusiasm of miners, which can improve the smoothness of the entire chain and more effectively solve the problems of rising gas fees and congestion in the message pool.

Of course, the most fundamental issue that Filecoin needs to solve is the TPS performance problem, so as to improve the smoothness of the entire chain.