Ethereum transaction fees have hit a yearly high in 2024. One of the factors is that the price of Ethereum has also hit new highs, but there’s much more to it. One way to minimize transaction fees is to use secure Multiparty Computation (MPC) for your multiple party approved transactions. In addition to minimizing the cost of your own transactions, you’ll maximize Ethereum’s throughput and contribute to reducing fees for everyone. 

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Ethereum Transaction Complexity Influences Cost

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Exchanges, custodians, institutions and other high-value investors typically use a multiple party approval scheme, where two or more people must authorize a transaction before it’s executed. This reduces the potential that a hacker or internal bad actor gains access to the private key and steals the digital assets.

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Ethereum charges gas based on the number of operations required to execute a transaction. Simple transactions require minimal operations and a minimal gas fee. More complex transactions, such as those which must verify and record the signatures of multiple approvers on chain, require smart contracts. These smart contract operations cost substantially more gas, in this scenario up to 10 times more.  

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For example, a simple single approver transaction on Ethereum requires 21,000 gwei for the withdrawal, and no fee for the deposit. In contrast, if the same transaction were executed using MultiSig, which requires smart contracts, it would require 100,000 gwei for the withdrawal, and another 100,000 gwei if the deposit is going to another MultiSig wallet, for a total of 200,000 gwei which is close to 10x more.

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Ethereum Gas Limits Can Limit Throughput

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Ethereum gas limits set a cap on how many operations can be included in each block.

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Transactions requiring more complex operations consumes more gas per transaction, resulting in fewer transactions per block.

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As noted above, multiple party approved transactions, which require smart contracts, increase transaction fees and decrease throughput. During periods of high utilization, the resulting network congestion leads to higher bids, and higher transaction fees for everyone. The increased adoption of Ethereum and DeFi in particular have resulted in much higher utilization, so the need to bid above minimal fees takes the above math and amplifies the issue. As a result, ETH transaction fees have recently hit a yearly high (Fig 1).

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Secure MPC Runs Off-Chain – Minimizing Operations, Gas, and Fees!

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Secure multiparty computation (MPC) is a newer and far more effective multiple party approval scheme. Unlike MultiSig, secure MPC runs entirely off-chain, so it appears to Ethereum (and other blockchains) as a standard simple transaction. No extra gas or fees are required. It appears as a standard single signature transaction, but with all of the enhanced security of multiparty approvals.

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While MPC minimizes gas, it maximizes security. This implementation of secure MPC is called a threshold signature scheme (TSS). It’s a proven technique that is supported across all blockchain ledgers and is now used by hundreds of cryptocurrency exchanges, institutional wallet users, and custodians.

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There are plenty of blogs that discuss MPC and why it’s so effective at securing digital asset wallets and why threshold signatures are better than MultiSig. The key point of this blog is that MPC minimizes Ethereum operations to reduce: gas, fees, and network congestion. It just also happens to increase security, making MPC the clear choice for multiparty approvals.