All About That Gas with Abdou Ndiaye | a16z crypto research talks | Summary and Q&A

TL;DR

This analysis focuses on gas pricing in blockchain networks, discussing economic principles and models for pricing strategies, including coarse-grained pricing at the user category level and the use of local fee markets.

Key Insights

• ❓ Pricing in blockchain networks should focus on rectifying externalities and optimizing network efficiency.
• 👤 Coarse-grained pricing at the user category level can increase efficiency and avoid pricing distortions.
• 🚱 Separating pricing for durable and non-durable resources, with a rebate system for storage, can better reflect their value and network load.

Transcript

welcome everybody uh really excited to have uh Abdullah and Jai from NYU uh NYU Stern uh formerly my upstairs neighbor and now my down the street neighbor sadly but uh still close by uh but abdu's background is a actually as a macro Economist but he's uh shifted the last couple years uh into doing a lot of work on crypto and today is going to talk ... Read More

Questions & Answers

Q: What is the primary objective of protocol pricing in blockchain networks?

The primary objective is to rectify externalities, such as reducing uncertainty and optimizing network efficiency.

Q: How can coarse-grained pricing at the user category level benefit blockchain networks?

Coarse-grained pricing reduces distortions and increases efficiency by pricing based on user categories rather than granular opcode levels.

Q: How can blockchain networks separate pricing for durable and non-durable resources?

Implementing a rebate system for storage, considering its long-term value, can lead to better pricing strategies for durable resources.

Q: How can local fee markets optimize network congestion and pricing?

Local fee markets consider the size and elasticity of submarkets, allowing for tailored pricing based on user demand and minimizing congestion.

Summary & Key Takeaways

• The primary objective of protocol pricing in blockchain networks is to rectify externalities, such as reducing uncertainty and optimizing network efficiency, rather than replacing competitive markets.

• Coarse-grained pricing at the user category level, rather than at a granular opcode level, can lead to increased efficiency and avoid distortions in pricing.

• Separate pricing mechanisms for durable resources (e.g., storage) and non-durable resources can be implemented, with a rebate system for storage to account for its long-term value.

• Local fee markets, based on the size and elasticity of submarkets, can optimize network congestion and pricing based on user demand.