As EIP-4844's 'data blobs' reshape the economic model of Ethereum's Layer 2 networks, the debate over long-term scalability versus short-term value accumulation of ETH is becoming increasingly intense.
Author: Donovan Choy
Translation: Plain Blockchain
The operating costs of Ethereum L2 have historically been very high, with L2s needing to pay millions of dollars for L1's data availability. This all changed after the Dencun hard fork (EIP-4844) in March 2024.
The hard fork introduced a block space expansion known as 'data blobs', allowing L2s to publish bulk data to L1 at a very low cost. The data blob space has a fee market independent of L1, costing about one-tenth of L1 block space, making it a key component of Ethereum's Rollup-centric roadmap.
For example, according to TokenTerminal data, Base's related costs reached $9.34 million in Q1 2024, but sharply dropped to $699,000 in Q2 and further decreased to $42,000 in Q3.
However, (bad news may be good news?) as on-chain activity increases during a bull market, the price of block space has risen again.
Currently, each mainnet block is limited to a maximum of 6 data blobs. When the utilization of data blobs reaches 50% (i.e., 3), a base fee will be introduced to regulate the demand from hundreds of L2s. When the utilization reaches 4 data blobs, the base fee will increase further, potentially raising the next block by up to 12.5%.
This is exactly what has started to happen in the past few weeks (see the chart below).
Source: Dune
In short, blobs are no longer free, and L2s need to start paying 'rent'. According to data from ultrasound.money, the blob fees destroyed in the past 30 days amount to about 212 ETH, bringing considerable blob fee revenue to the Ethereum mainnet.
Source: Blockworks Research
Overall, the introduction of blobs is a good thing: the operating costs for L2s have decreased, which is undoubtedly a positive for L2 users.
But some people (in other words, ETH holders) are not very satisfied, as L2s seem to have paid very little to L1, which also means the value that ETH as an asset derives from it has diminished.
This dissatisfaction mainly stems from two points of pessimistic expectation, namely the belief that the usage of blobs is insufficient to bring returns to L1:
1) L2s are essentially commercial entities. They will choose cheaper data availability providers, such as Celestia or EigenDA, or even worse, a less secure centralized data availability committee (DAC).
2) When blob market fees rise, L2s may delay sending data back to L1, as has been seen in the past operations of Scroll and Taiko.
During the discussion about blobs at Devcon, Ethereum researcher Ansgar Dietrichs acknowledged the misalignment of incentives in L2s, but he countered that as more L2 networks form trust bottlenecks around Ethereum's data availability (DA), Ethereum's DA will become increasingly important in the long run.
Tim Robinson from Blueyard proposed the view that 'blobs are a traffic diversion strategy'. He pointed out that although the current revenue from blobs is limited, due to its economic design, it will quickly generate huge value in the future, bringing rich returns to Ethereum. According to Robinson's blob simulator, assuming an Ethereum L1 processing 10,000 TPS and a blob size of 16 MB (currently blob size is 125 KB), it could destroy 6.5% of ETH annually.
This is also why blobs have fundamental benefits for Ethereum in the long run. Limiting the number of blobs or raising blob fees to extract more value from L2 in the short term is actually a bad form of 'rent-seeking'.
Ethereum researchers are also actively supporting this view. In a research article published two days ago, Toni Wahrstätter called for a conservative increase in the number of blobs from 4/6 to a higher 6/9.
In ACDE #197, Vitalik also proposed increasing blob space by 33% in the next Pectra hard fork. He warned that this adjustment is crucial, or users may migrate to other chains.
In summary, the complex debate around blobs boils down to one question: Should Ethereum prioritize ordinary L2 users and their 'Ethereum eco-friendly' L2 systems, or prioritize the value accumulation of the ETH asset?
Ethereum researchers believe that overly focusing on the latter may cause users and developers to migrate to cheaper chains, so they choose to continue expanding blob space to pave the way for long-term development. However, this also undermines the appeal of ETH as an economic asset, causing dissatisfaction among ETH holders in the short term.
In any case, this is a complex issue that requires precise predictions about the future and weighing various possibilities of 'what if'. Which path is more correct can only be proven by time.
Article link: https://www.hellobtc.com/kp/du/11/5546.html
Source: https://blockworks.co/news/ethereum-blobs-balancing-act
