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Shanghai Upgrade Will Cut Gas Fees for Certain Key Participants on the Ethereum Network

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Well gang, the 'Merge' has been successfully completed, but the job of this Ethereum upgrade is far from over. Next up, the Shanghai stage - a much anticipated event that will usher in the implementation for chain withdrawal of the pre-merge Ethereum staked in the Beacon chain. This EIP-4895 initiates a system operational support to support said withdrawals and allow the staked Ethereum to be removed from the Beacon chain. [See e.g. CoinPasar. After the Merge: What can we expect for the Shanghai Upgrade?. (Accessed November 8, 2022)].

Despite the notoriety of EIP-4895 within Shanghai, among all the remaining improvement proposals, EIP-3651 stands out. In essence, EIP-3651 would reduce gas fees for 'builders' who are some of the network's most important participants.

It is the function of the 'builder' within the system to, as the name implies, arrange and organize transactions in a specific order. The 'builder' organized transactions are the forwarded to a validator who in turn organizes the transactions for chain inclusion. 'Builders' themselves receive compensation from the traders to organize the transactions in the particular order. At first blush, before EIP-3651, traders would pay higher gas fees to have these transactions confirmed sooner. [See, e.g. Jha, P. Ethereum Shanghai upgrade: EIP-3651 to cut gas fees for key network participants. (Accessed November 8, 2022)].

EIP-3651 is also referred to as 'Warm COINBASE'. COINBASE, used in association with EIP-3651 is the software utilized by 'builders' to receive new tokens to the Ethereum network and every new network transaction must interact with COINBASE multiple times. At present, a transactions first interaction with COINBASE bears a higher cost as the COINBASE software must 'warm up'. As such, COINBASE may be viewed as overpriced as the address is at the beginning 'cold' under the EIP-2929 access list. [See e.g. Morriss, W. EIP-3651: Warm COINBASE [DRAFT]. (Accessed November 8, 2022)].

By EIP-3651 labelling the COINBASE addresses as 'warm' at the onset, a lower gas fee will be required by the protocol for access to it. In turn, validators may now collect the block reward and transaction fees when validating the block.

Ethereum developer Tim Beiko in a Twitter Post explains this in a Twitter post as follows:

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While it is very true that the validators are the major beneficiaries resulting from implementation of EIP-3651, traders who use 'builders' may also benefit as they no longer are required to pay fees associated with failed trades. At present, traders are charged fees associated with failed trades as the transactions must be confirmed to chain regardless of the success or failure of the transaction. [See e.g. Jha, supra].

In any event, a sub-Reddit post by u/LivingFondant1419, painfully reminds us: "'Key network participants' sounds like it means 'not me' 🤣" [LivingFondant1419. Sub-Reddit Post. (Accessed November 8, 2022)]. Unfortunately the gas fees will remain higher for all of us 'regular/ordinary' users.

This Shanghai stage upgrade still has quite a ways to go. Implementation of Shanghai is not expected until September, 2023. Accordingly that which is being discussed in this upgrade now may get whittled out of the upgrade progression as time moves forward.

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