Tomasz Tunguz - Gas Gas Revolution
Tomasz TunguzVenture Capitalist If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. Gas Gas Revolution
In 2021, Amazon announced they had reduced prices on Amazon Web Services 107 times since launch. This drop in prices has grown AWS into a $90b revenue business in 17 years. As storage & compute became less expensive, the economic viability of new use cases became increasingly apparent & developers built software on the cloud. The same cost-reduction phenomenon is occurring with blockchains, though it’s not nearly as well publicized. The cost to save data to a blockchain is called gas. In 2021, at the peak, the average quarterly gas fee on Ethereum reached about $37. To send a file (an NFT perhaps) to a friend, cost the user $37. Some days that figure soared about $70. At those prices, not many transactions are economically viable. Compare that to AWS’ managed database, Aurora, which charges $0.0000002 per request. (I’m ignoring the storage cost here). However, over the last few years, we have seen a meaningful reduction in the cost per transaction. First, Ethereum overall has fallen from $37 to $2. Newer technologies called layer 2s, which are faster, less expensive databases running atop Ethereum have further cut the price to $0.15 for Optimism & $0.08 for Arbitrum. Some newer blockchain databases like Sui have further pushed that cost to $0.0019 as of this writing.
The trend is evident & inexorable. The cost to store data unblock chains has fallen five orders of magnitude in the last 3 years. It’s a sort of inverse Moore’s Law - let’s call it Eroom’s Law for fun. As Eroom’s law continues to progress, I expect we’ll see the cost to store data h my gosh on a blockchain approach that of a classic database like Aurora. More (e)room for data for less dollars. AWS Aurora has benefitted from efficiency gains since 1986 - 37 years of development. Ethereum, the oldest blockchain database listed, turned 8 this year. Given another few years at this pace of innovation, it’s not unreasonable to expect blockchains to be cost-competitive to classical databases. More than that, they offer different types of promises to developers for data sovereignty, mathematical proofs, resiliency, & resistance to attack. It’s the gas gas revolution. As the gas costs fall, more applications will be built on blockchains. |
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