EIP-3651 will reduce gas fees for key network participants in the Ethereum Shanghai upgrade

Key points:

• The upgrade will allow Ether holders, who have held Ether over the years to, retire systematically and make the network more scalable.
• In addition to some major scalability upgrades, key events include some minor Ethereum Improvement Proposals (EIPs), including EIP-3651, EIP-3855, and EIP-3860.
• The testnet version of the Shanghai upgrade, dubbed Shandong, went live on October 18.

Ethereum’s Shanghai upgrade is the next major upgrade after the Merger, scheduled for the second half of 2023. The upgrade will be an important milestone as it will allow Ether holders who have held Ether over the years to retire systematically and make the network more scalable.

In addition to some major scalability upgrades, key events include some minor Ethereum Improvement Proposals (EIPs), including EIP-3651, EIP-3855, and EIP-3860. Of all the upcoming improvements proposed, EIP-3651, dubbed WARM Coinbase, could be a game-changer that could lower network fees for some key network players, so-called builders.

Here, Coinbase is the name of the software that builders use to acquire new tokens on the network. Every new transaction on the platform has to interact with the Coinbase software multiple times. The first interaction is more expensive because the software needs to "warm up", and then as the interaction increases, the cost decreases. However, with the introduction of EIP-3651, the Coinbase software will initially be kept warm, requiring lower gas fees to access it.

Doing so would reduce fees for calls that make transfers to the COINBASE address, which is frequently used in systems like Flashbots (do they not have a Twitter???)

— timbeiko.eth (@TimBeiko) March 4, 2022

As the name suggests, the builder is responsible for packaging Ethereum transactions into blocks, hence the name block builder. These transactions are then routed to validators, who place them on the blockchain in the correct order.

These builders are paid by merchants to arrange transactions in a block in a specific order, meaning merchants pay higher gas fees to validate their transactions faster. Currently, Flashbots are the largest builder in the Ethereum ecosystem, accounting for 80% of forwarded blocks.

While validators using the builder will benefit the most from the upgrade, traders using the builder to execute transactions can also benefit as they no longer have to pay transaction fees for failed transactions. Merchants also currently pay for failed transactions, as miners need to confirm the transaction to the chain regardless of whether the transaction was successful or not.

The testnet version of the Shanghai upgrade, dubbed Shandong, went live on October 18, and Ethereum developers will be working on various implementations until September 2023.