“Gas Farming” has nothing to do with farts, but it does smell bad for Ethereum.
Tags: Cryptocurrency, Uniswap, Defi, Smart Contracts, Ethereum

“Gas Farming” has nothing to do with farts, but it does smell bad for Ethereum. WhatIfIToldYou Jan 23·4 min read

A Gas Farming bubble is coming, it has not yet started, in fact it is probably months away from even appearing on the radar of the wider crypto community, but it is coming.

Here we discuss how the tokenomics around some new projects point towards the inevitable, and why gas fees will become higher than we could ever imagine.

Ethereum transaction fees are the biggest thorn in the side for the DeFi space. Many transactions are simply not worth spending the gas on and this is killing innovative projects where non-profitable transactions deem contract interactions financially unviable.

Yes solutions are on the way and we see a tangible future approaching where these issues are mostly solved.

In such a fast paced industry however, innovation waits for nothing. Blockchain developers are finding solutions we can use right now but are these solutions sustainable?

Band-aid solutions

Chi GasToken

Last year we saw 1Inch introduce the Chi Gastoken. Innovative? Yes, but at its core it is essentially an exploit of a mechanism on the Ethereum network that exists to incentivise developers to clean up/destroy unused contacts. Not exactly good for the network, but does provide some relief to users while we wait for ETH 2.0 and other solutions to mature.

Ethanol Token

More recently we have seen some new and innovative “band-aid” solutions that aim to solve the issue for now, but these are potentially a lot more damaging to the network than the Chi Gastoken. Ethereum users can definitely benefit greatly in the short term but these solutions are simply not going to be sustainable.

In late November 2020 we saw the launch of Ethanol Token, a smart contract that offer holders USD equivalent cash back on their Ethereum transaction fees.

Ethanol rewards you with up to 100% of your gas spent on each transaction forever in ethanol tokens.

UniDexGas Token

UniDexGas Contract was launched in January 2021 by the team who developed UniDexBot, a tool for high volume traders to automate the trading of percentage based buy and sell cycles and more. High transaction fees however, significantly reduce the opportunities on small percentage price swings.

Hence the development of the UniDexGas project, which copied the concept employed by the Ethanol project but improved upon the tokenomics. The Ethanol team have since revised their tokenomics and now both projects are very similar.

What is Gas farming?

As of right now, If you were to hold both Ethanol and UniDexGas tokens, it is possible to earn back more than you spend on transaction fees, incentivising you to make pointless transactions with high fees applied. At the end of each day claim all your fees back in both Ethanol and UniDexGas.. Rinse and repeat this and you will be “Gas Farming”.

If we only had one project that offers a rebate on gas fees then this COULD be sustainable, at least for a while. However, if you know the crypto space then you know that when something works others will either want to do it better or simply make cheap clones, and more clones, and more clones.

(edit: new project - GasGains)

(edit: new project - GascashbackToken)

(edit: new project - Gasify)

(edit: new project - Fintex)

How the gas farming bubble will happen

In a scramble to avoid the rising gas fees, Ethereum users are going to have little choice, either be sucked in to the gas rebate vortex or be excluded from the network due to the insane fees.

Once more similar projects begin launching (which is already happening), the incentive to create bots to farm this gas rebate exploit will become greater and greater. Imagine bots creating 100’s of expensive transactions a day and then claiming 10 times that back in gas rebates from numerous projects similar to ENOL, UNDG, GASG, GCB, etc.

When there are gains to make, there is little regard for the consequences.

Obviously this article is neither an endorsement, nor a tutorial on Gas Farming, which is why I have left out the details of how the tokenomics work in any great depth. The intention of this article is to simply raise awareness and provide a warning of what is to come. I do not see any way out of this other than to let it ride its course, and eventually become another event we look back on for years to come. If anything, I can only hope the bubble comes and goes quickly and eventually leads to the fast tracking of more legitimate solutions.