Author: 0xNatalie

Ethereum Execution Layer Meeting 195 discussed a proposal to adjust the minimum base fee for blobs. Blobs are a type of data storage introduced by EIP-4844 in the Cancun upgrade, which is used to store and process data on Ethereum at a lower cost. The current minimum base fee (MIN_BASE_FEE_PER_BLOB_GAS) is 1 wei. SMG researcher Max Resnick proposed raising this minimum fee to speed up fee adjustments when the network is congested.   Raising the blob base fee: a cure or a poison? The minimum base fee is the minimum fee required to process blob data. Since the implementation of EIP-1559, Ethereum's gas structure has changed. Previously, Ethereum's transaction fees were determined by bidding. The higher the user's bid, the higher the priority of their transaction to be packaged into the block. This mechanism led to a sharp increase in transaction fees when the network was congested, and this increase was often unpredictable. EIP-1559 divides the gas fee into two parts: the base fee and the tip. The base fee for each transaction will be destroyed and automatically adjusted according to the congestion of the network. When the network transaction volume is high and the block space utilization is high, the base fee will rise accordingly, making the transaction fee more predictable, while slowing its inflation rate by destroying part of the ETH. In addition, users can still incentivize miners to prioritize transactions through tips, but this part of the fee will not be destroyed, but paid to miners as a reward. Setting a minimum base fee for blobs means that the cost of processing blob data will not be lower than this minimum even when the network is idle. Raising this minimum value will increase the cost of L2 submitting data to the main chain, theoretically burning more ETH. Max proposed to increase the minimum base fee from 1 wei to 160,217,286 wei in order to reduce the time required for the price to adjust to a reasonable level. He believes that the current blob price is growing too slowly when entering price discovery (i.e. determining the appropriate blob Gas price), and it takes about 160 blocks (about 32 minutes) to reach a reasonable price from zero, resulting in too much time to reach a reasonable fee level when the network begins to be congested.By raising the minimum base fee to a value closer to a reasonable price, the fee can reach an appropriate level faster. This ensures that the Ethereum network can process transactions and blob data more quickly and stably. Max believes that adjusting to 160,217,286 wei will not increase the final price of blob Gas too much, but it can greatly shorten the time it takes for the price to reach equilibrium.   Community Viewpoint This proposal has aroused heated discussion in the community. Ryan Berckmans opposes raising the blob base fee, believing that Ethereum's current strategy is to attract more users and developers to join the network by providing low-cost or even free data availability (DA) when congestion is low, thereby accumulating network effects. This strategy is similar to the "occupy the market first" approach in order to gain a larger market share and ecosystem value in the future. He believes that raising fees will increase market barriers and weaken the neutrality of the network, and the current blob market is not yet fully stable, so this adjustment should not be made hastily.   Blockworks team D believes that raising the minimum fee will not only not help solve Ethereum's current expansion problems, but will weaken Ethereum's competitiveness in data availability services. He advocates increasing execution fees by expanding L1 and making DA services cheaper to enhance Ethereum's overall competitiveness and attract more Rollups to further expand the use and demand of ETH. Foobar, the founder of clusters, holds a similar view. He believes that raising fees is too short-sighted, which will damage Ethereum's credibility and may also cause Rollups to migrate to alternative chains such as Celestia, weakening the core value of Ethereum.   Nethermind developer Bena Adams supports the proposal. Bena mentioned that although the difference between 1 wei and 1 gwei is small in economic value, 1 wei is not suitable as the minimum unit when the Ethereum network faces congestion. Because although theoretically the fee will increase with congestion, since the minimum unit is 1 wei, the fee growth is too slow to reflect the actual congestion of the network in a timely manner, and thus cannot play a role in regulating network demand. Ethereum researcher Potuz pointed out that if the fee is set by the beacon chain (CL) rather than the execution layer (EL), the minimum fee may be set directly to 1 Gwei (that is, 1 billion wei). The beacon chain uses the uint64 data type instead of uint256 when processing fees.uint64 has low precision when dealing with decimals, so extremely small values ​​like 1 wei are not usually used as the minimum unit of fees. So if the fee was initially set by the beacon chain, there might not be such a dispute over the small minimum fee unit at all.   Can it really alleviate ETH inflation? In addition, those who support raising the minimum base fee for blobs also believe that doing so can ease ETH's inflationary pressure. For example, Cygaar of the Abstract team believes that Rollups are the main source of ETH Gas fees before the implementation of EIP-4844 (March 13, 2024). However, the current price of blobs is almost free for Rollups, and Ethereum gets almost no value from L2's DA costs. One solution in the short term is to increase the blob base fee, increase burns, and thus reduce ETH's inflationary pressure. However, ambient founder Doug Colkitt pointed out that currently in the Ethereum network, although the usage rate of blob space has reached about 80%, these spaces are mainly occupied by low-value spam transactions. These low-value transactions are very sensitive to fee changes, that is, if blob fees increase even slightly, these low-value transactions will quickly decrease or even disappear. Ultimately it does not significantly increase the burning rate of ETH. When will ETH start deflation? Leaving aside blobs, what is the approximate base fee for Ethereum blocks when ETH will start to deflate? The total supply of ETH has no upper limit. Under the PoS mechanism, the annual issuance of ETH is mainly determined by the amount of ETH participating in the pledge and the overall activity level of the network. As the amount of pledged ETH increases, the issuance will increase accordingly. At the same time, the destruction mechanism introduced by EIP-1559 has a certain offset effect on the increase in issuance. After the implementation of EIP-1559, the annual issuance rate is approximately between 0.5-2% (depending on the amount of pledged ETH and network activity), the average block size target is 15,000,000 Gas, and the average block time of Ethereum is 12.05s. ETH will begin to deflate when the amount burned exceeds the annual issuance. The amount of ETH burned in each block is equal to the sum of the base fees of all transactions in the block. The formula is: base fee × block size (calculated based on the target value of 15,000,000 Gas). The annual burning amount is: ETH burning amount per block × number of blocks produced per year (based on the average block production time of 12.05 seconds, it is estimated that there are approximately 2,620,000 blocks per year). Assuming that the annual ETH issuance is 1%, based on the current supply of 120,330,000 ETH, it is approximately 1,203,300 ETH. If ETH is to achieve deflation, the annual burning volume must be greater than 1,203,300 ETH. Therefore, the following relationship can be derived: Basic fee × 15,000,000 × 2,620,000 > 1,203,300 By calculation, ETH can start deflation when the basic fee is approximately 30.62 Gwei. Similarly, if the annual issuance of ETH is 0.5%, the base fee will be approximately 15.31 Gwei to achieve ETH deflation. If the annual issuance of ETH were 2%, a base fee of approximately 61.23 Gwei would be required to achieve ETH deflation.

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