Understanding Ethereum Gas Station Networks
Ethereum Gas Station Networks (GSN) is a system that allows users to interact with Ethereum-based decentralized applications (dApps) without paying gas fees in ETH.
Gas fees are payments made by users to compensate for the energy required to process a transaction.
Instead, users pay the GSN with any asset, and the GSN pays validators with ETH. Users can pay for their GSN using other altcoins, stablecoins, and even fiat currency.
The GSN was created by TabooKey and was first launched in 2019. The protocol has onboarded hundreds of dApps, companies, and platforms in the Ethereum ecosystem.
Relayers
To achieve a “gas-less network,” the GSN introduced a layer of relayers (third-party services that facilitate data transition between blockchains) on Ethereum. These relayers are responsible for paying the gas fees for the transactions.
When a user interacts with a decentralized Application (dApp), the transaction is sent to a relayer. The relayer then signs the transaction, sends it to the Ethereum mainnet, and pays for the gas.
The user pays the relayer for its service in any token, and the Ethereum network processes the transaction, executing the smart contract associated with the user’s request.
Practical Example of how Gas Station Networks work
For example, Alice wants to open a vault on MakerDAO (a service on a dApp that uses GSN) but doesn’t want to convert her DAI to ETH.
Instead, she chooses to use the GSN to complete the transaction. MakerDAO sends her request to a relayer, which verifies whether she has the needed DAI in her balance.
Then, the relayer pays for the transaction, and Alice pays the relayer with DAI. She covers the actual gas fee and a small premium for the relayer’s work. Now, Alice has a MakerDAO vault without having ETH in her wallet.
How Gas Fees Work on the Ethereum Blockchain
On Ethereum, gas fees are measured in gwei, a subunit of Ether.
As of 2021, gas fees are split into two important components:
- The Base Fee: a standard fee applied to all transactions. It can fluctuate depending on the blockchain’s capacity and the number of validators available.
- The Priority Fee: a tip users can pay to prioritize their transactions. The more the tip is, the faster a validator will process a transaction.
Formula for gas: Units of Gas Used * (Base Fee + Priority Fee)
As an illustration of how this works in practice, let’s consider Chris sending 1 ETH to Bob.
An ETH transfer requires 21,000 units of gas, and the base fee is 10 gwei. Chris includes a tip of 2 gwei as the transaction is urgent, i.e. 21,000 * (10 + 2) = 252,000 gwei (Total of 0.000252 ETH).
When Chris initiates the transaction, 1.000252 ETH will be deducted from his account. Bob will receive 1 ETH, the validator will receive the tip of 0.000042 ETH, and the base fee of 0.00021 ETH will be burned (removed from circulation).
