- After the Cancun upgrade, Ethereum Layer 2 (L2) is expected to witness a significant reduction in average gas fees by at least 10 times.
- The Cancun upgrade will introduce three new Blob spaces on the Ethereum mainnet, specifically for storing L2 transactions and state data, each with its own gas fee market.
- Each Blob space is estimated to have a maximum capacity for state data equivalent to one mainnet block, or ~1.77M.
- The assumption is that if total gas demand for Rollup L2s remains constant, and the available block space for L2s increases from ~10% of one block to three complete Blob blocks, the total supply of block space will expand 30 times, leading to a significant reduction in gas prices.
- However, this conclusion may oversimplify the complex dynamics and competition between Rollup L2s for Blob space, impacting gas prices.
- Rollup L2s face a competitive zero-sum game after the Cancun upgrade, vying for developers, funds, users, and Dapps, along with competition for the three new Blob spaces.
- Leading Rollup L2s may potentially abuse Blob space by modifying the frequency of their sequencer's batch, aiming to synchronize with the Ethereum mainnet block production speed and suppress competitors.
- This competitive strategy could lead to a surge in verification fees and batch fees, limiting the positive impact of new Blob spaces on L2 gas fee reduction.
- Consequently, the predicted decrease in Ethereum L2 gas fees after the Cancun upgrade may be less than initially expected, with diminishing returns as a result of competitive dynamics.
