2021-03-24 10:00:00

Hermez Network Challenges Ethereum Gas Fee Issues

Hermez Network, a decentralized zero-knowledge rollup (zk-rollup), officially launched its mainnet. The project intends to lower gas fees on Ethereum by rolling multiple transfers into a single transaction.

As the Ethereum blockchain has increased in popularity, the resulting traffic has resulted in skyrocketing transaction fees. Hermez Network intends to lower these fees using a few different methods.

Hermez Batches Transactions

Currently, each transaction, regardless of size, incurs a cost. Many of these transactions can happen at once in an uncoordinated fashion, leading to a higher cost of processing any individual one. Instead of sending multiple unique transactions, it compresses and aggregates thousands of them in batches.

Developers expect the batching to reduce Ethereum transaction costs by up to 90%.

Additionally, Hermez will not be significantly contributing to the network’s processing load by doing this.

Hermez is a zero-knowledge rollup (zk-rollup). This means it is a layer on top of Ethereum that uses the network for data storage rather than for computation. In other words, it handles data availability on-chain but does computation off-chain. It uses easily verifiable zero-knowledge proofs that demonstrate the off-chain computations have been carried out correctly.

Proof-of-Donation Mechanism

Anyone can contribute to Hermez Network by becoming a network coordinator. These users run hardware that verify and batch transactions. This is where the computations take place. The batched transactions are then recorded on the Ethereum blockchain.

Coordinators bid for the right to process those transactions in an auction. They place their bids using Hermez Network’s native utility token HEZ. The winner of the auction has a 10-minute slot to process as many transactions as possible. When the transactions are complete, the coordinator receives the transaction fees as a reward.

The system utilizes a new consensus mechanism called Proof-of-Donation. Essentially, this means 40% of the coordinator’s winning bid goes back to the Ethereum developer community. This mechanism is a means of aligning the incentives of the Ethereum community, Hermez coordinators, and network users.

In January 2021, Tether announced that it would be launching Tether tokens (USDT) on the Hermez Network. Hermez Network-enabling stablecoins will also enable businesses to process payments on the network. With lower fees and faster transactions, many businesses could end up utilizing the platform.

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