- EIP-7781 aims to reduce Ethereum’s block time from 12 to 8 seconds, increasing transaction throughput by 33%
- Shorter block times could enhance the performance of decentralized exchanges like Uniswap v3, improving efficiency and reducing costs for users
- Implementing this proposal may save users around $100 million annually by minimizing costly arbitrage opportunities between centralized and decentralized exchanges
The Ethereum community is considering EIP-7781, which is targeted at improving the scalability of Ethereum by increasing the network’s transaction processing speed. Ethereum currently takes 12 seconds to create a new block and add it to the blockchain. Ben Adams’ proposal suggests slashing that down to 8 seconds, but there are some issues that need to be considered.
How Does It Work?
Let me explain in further detail! The time between inputting one block and another is what’s called the slot time. If this time were reduced, that would simply mean new blocks are added at a much faster rate.
Throughput, however, refers to how many transactions can be processed by the network in a given amount of time. With the reduction in slot time from 12 to 8 seconds, Ethereum could now process 33% more transactions in the same given amount of time.
A reduced slot time would enable it to serve the traffic better by reducing congestion within the network. This would be very helpful in periods of very high demand, especially those spikes in demand for NFTs and DeFi applications that see users bearing the brunt of delays and high costs.
Justin Drake Approves
Well-known Ethereum Foundation researcher Justin Drake has also weighed in on the GitHub proposal to reiterate that it would advance the greater scalability goals of co-founder Vitalik Buterin.
To this effect, Drake explained that trimming down the slot time would make decentralized exchanges such as Uniswap v3 22% more efficient. In this case, he said, the transactions would execute a lot faster and would require much less waiting to fill the trade.
Therefore, with improved efficiency, the time the system takes to find the best price for a transaction would go down, thereby reducing the cost of the difference in prices that sometimes occurs when switching from a centralized exchange—which could include Binance or Coinbase—to a decentralized one such as Uniswap.
According to Drake, the improved efficiency of Uniswap v3 and other decentralized exchanges might save users around $100 million annually. Savings, in this case, would be a result of the reduced costs due to arbitrage—profit opportunities that materialize when there is a price difference between centralized and decentralized exchanges.
This means fewer opportunities for costly arbitrage with a faster network, translating to overall savings for users.
Conclusion
It is not out of place to state that in addressing the scalability problem prevalent within the network, EIP-7781 is one of the high steps. By way of this proposal, reducing slot time to 8 seconds from the existing 12 can tremendously increase the throughput to keep the network efficient, highly functional, and ecologically friendly, especially during periods when demand exceeds supply.
Supported by proponents like Justin Drake, this could achieve the ultimate goal of not only speeding up transactions on decentralized exchanges like Uniswap but also saving millions of dollars for their users. The future will indeed be set by the way the Ethereum community reacts to this proposal for the blockchain network and its ecosystem.
