Vitalik Buterin announced a new strategy for Ethereum payments

Ethereum founder Vitalik Buterin has announced plans to reform how transaction fees are assessed. Called multi-dimensional gas pricing, this initiative could improve Ethereum's trading methods.

The evolution of Ethereum's pricing mechanism is critical to staying competitive in the blockchain space. It should attract users and developers in the face of increasing competition.

Vitalik Buterin explains why Ethereum needs a versatile gas price

Historically, Ethereum has used gas to measure the computational effort required for transactions and blocks. This class combines various computational efforts, such as computations and storage operations, into a single parameter. While this simplified transactions, it introduced significant inefficiencies due to the inability to differentiate between different resource needs.

Buterin criticized the oversimplification of the traditional model. He considered different resources to be flexible, but in practice they are not.

Read More: When Are Ethereum Gas Charges Lowest?

Consequently, the introduction of Multidimensional Gas with the Ethereum Improvement Proposal (EEP) 4844 marks a significant evolution. This proposal aims to allocate blockchain resources more accurately and efficiently.

The recent Denkun update exemplifies this approach by integrating “blobs” of second layer solutions that enhance Ethereum scalability. Buterin said, “Bundles have become 100x cheaper, and transaction volume on bundles has increased more than 3x.

Buterin's proposal aims to increase multi-scale gas prices and secure the network. It also addresses economic aspects by optimizing marketing and operational costs.

However, there is a trade-off in reducing transaction fees. Following Denkun's update, the average Ethereum transaction fee dropped significantly, dropping by more than 90% across various Ethereum Layer-2 networks.

“The new supply of ETH is now growing at a rapid pace,” CryptoQuant said in a report with BeinCrypto.

This reduction in transaction fees has reduced the overall fees burned despite high network activity. As a result, the burn rate of the circulating ETH supply has decreased, effectively moving Ethereum from inflation to inflation.

Meanwhile, Ethereum faces competition from Solana, a blockchain network that processes transactions at low costs. Dan Smith, senior research analyst at Blockworks, suggests that Solana could overtake Ethereum in transaction fees this week.

Its analysis is based on the total economic value returned to the verifiers, including transaction fees and the maximum realizable value (MEV) retained.

Read more: What is Maximum Extractable Value (MEV)?

However, Ethereum still leads in transaction fees. According to Defilama, it generated more than $2.34 million in transaction fees in the last 24 hours, compared to Solana's $1.19 million.