Wednesday, August 30, 2023

Are You Running a Gasless Decentralized Exchange? Here's A Useful Tip for Keeping Your Gas Fees Under Control

When Satoshi Nakamoto first described blockchain technology, the decentralized world rejoiced. However, the economic reality that keeps these networks functional—gas fees—has often been a point of friction. In the blockchain landscape, gas fees serve a crucial role; they incentivize miners or validators to confirm transactions and maintain the network. 

Unfortunately, these gas fees can get pretty expensive. According to Cointelegraph, gas fees on the Ethereum network reached an all-time high in February 2021, with an average fee of around $17.67 per transaction. These high fees can be prohibitive for small investors with limited capital. 

Fortunately, many decentralized exchanges are going “gasless” these days. Thanks to the use of “relayers”, they bear the cost of gas fees on all transactions, which significantly lowers the barrier of entering the world of DeFi for small investors.

Nonetheless, given the large volume of transactions daily, these fees are an operational cost that must be carefully monitored lest they run out of control and hurt the bottom line.

Controlling the Cost of Your Gas Fees is Hard

It's easy to underestimate the cost of gas fees, particularly when you're focused on the larger operational aspects of running an exchange. High-frequency trading, asset transfers, and smart contract deployments each carry a cost. 

When these are happening at scale, even small fluctuations in gas prices can lead to significant financial drain. In volatile market conditions, gas fees can spike unpredictably, making them a complex line item to budget for accurately.

It becomes even harder when you consider the following problems:

#1 The Limitations of Existing On-chain Analytics Tools

Most businesses are currently leveraging existing on-chain analytics tools. These platforms provide a broad overview of transaction metrics, including gas fees, but they often lack the granularity and customization needed for nuanced management. For instance, these tools might not differentiate between costs incurred from different types of transactions (e.g., asset transfers, smart contract interactions, etc.), making it challenging to pinpoint exactly where expenses are ballooning. Also, most on-chain analytics tools are general-purpose and not optimized for tracking gas fees, rendering them an ill-fitting solution for the specific challenges at hand.

#2 The Lag Between Information and Action

Even with an advanced monitoring tool, there exists another insidious challenge—the lag between acquiring information and acting upon it. Having real-time information is undoubtedly beneficial, but it's only part of the equation. Once you have the data, you need to take swift, decisive action to mitigate costs, such as halting all transactions until gas fees fall below a specific threshold etc. Unfortunately, the administrative and procedural delays inherent in making such high-stakes decisions can be costly. By the time you've assessed the situation and taken action, you might find that you've already incurred higher fees than anticipated. 

Enter CoinsDo Enterprise - A Non-Custodial Digital Asset Management Solution with Built-In Controls for Gas Fees

To address the problems mentioned above, our exchange partners have come to rely greatly on CoinsDo Enterprise, a comprehensive digital asset management solution that can automate asset withdrawals, deposits, collections, and dispatches etc. with the following benefits:

Gas Fee Control

Using CoinsDo, merchants can set a limit on the amount of gas fees they are willing to pay per transaction. If the gas fee on the chain is higher than the limit, the transfer will be halted until the gas fee drops below the limit.

Automated Asset Collection

Our platform can automate the aggregation of different digital assets from various wallet addresses while controlling gas fees. This is based on predefined rules such as minimum asset balance or transaction sequences. This feature allows exchanges to optimize the management of trading pairs, liquidity pools, or customer withdrawal requests, enhancing their operational efficiency in real-time.

No Unauthorized Transactions

With CoinsDo's dynamic key feature, each transaction is rigorously scrutinized, minimizing the risk of unauthorized activity. This helps position them as a trusted choice for discerning traders.

Final Thoughts

In an industry that is still finding its footing, controlling operational costs like gas fees gives you a distinct competitive edge. Our decentralized, non-custodial, digital asset management platform doesn't just offer a solution—it offers a paradigm shift in how businesses approach gas fee management.

Contact us today for a free demo - your finance team will thank you when quarterly reviews show a drastic reduction in operational costs, directly attributable to optimized gas fee management.

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