Ethereum (ETH) commissions are coded to be paid only on Ether, but with a brilliant trick with smart contracts, it allows users to effectively pay for gas with a special token, which reduces the commissions involved in the transactions.
This principle was used by the team behind 1inch.exchange, a decentralized exchange aggregator, to introduce the Chi token, the technology was formally announced on June 5, and is based on a previous iteration of the concept, called the Gas token (GST).
June 8 Price Analysis: BTC, ETH, XRP, BCH, BSV, LTC, BNB, EOS, ADA, XTZ
How does it work?
The Chi token takes advantage of a mechanism that reimburses the gas when storage space is freed up in the virtual Ethereum machine. In the case of gas tokens, burning them destroys fictitious „intelligent sub-contracts“ that were created when the tokens were minted, which, according to the team, is more efficient than deleting data directly.
Chi tokens will be created when gas rates at Bitcoin Rush are low, allowing the user to „store“ that price for later use, as 1inch.exchange CEO Sergej Kunz explained in the hackathon ETHGlobal, this is especially useful for implementing smart contracts, an operation that can consume millions of gas, to put this in perspective, the total gas limit for a block is currently 10 million.
To save on fees, the token must be burned along with the main operation, which reduces the total amount of gas spent on that transaction. This is because the rebate operation cannot result in total gas consumption equal to zero or negative, which means it must be combined with another action to be effective.
However, the developers of, Chi, say the token can reduce the price of a transaction by up to 50%.
Tron Blockchain dApps Focus on Gambling Continues to Lead the Way
The impact of Ethereum commissions on the market
The ability to set low gas prices during periods of inactivity could have a significant impact on the Ethereum commission market.
As pointed out by Vitalik Buterin and other developers in their discussions on the former Gas token, the mechanism could reduce the price of gas between the periods of high and low activity, users would source tokens when it is cheap to do so, and use them when gas tariffs increase, thus balancing the overall demand for gas.
Anton Bukov, CTO of 1inch.exchange, however, was sceptical that the Chi token would alter the economics of Ethereum’s commissions:
„I don’t think this will change anything, except that users have a way of tokenizing the price of gas and can speculate on it.“
Bukov pointed out that the Chi token already has a use case on the 1inch platform, which allows users to save on commissions with token exchanges.
On the other hand, the Gas token, born in 2018, did not achieve adoption because „very few people understood how it worked,“ Kunz told Cointelegraph.
Bukov said GST also had a problem interacting with the ERC-20 standard, which resulted in „wallets and even Etherscan showing incorrect amounts.
While GST was used primarily by referees, Kunz said, direct integration with 1inch.exchange also generated interest from other users, he also revealed that some decentralized finance providers are looking to integrate the Chi token into their systems.