A Web3 researcher known as Cygaar has called for an increase in transaction fees for BLOB objects in Ethereum to restore the ETH burn rate.
Right now the relationship between Ethereum L1 and its L2s is quite lopsided.
L2s receive the benefits of Ethereum security without contributing much value back to ETH. There are two paths I see that can lead to equilibrium being restored:
1) Increase the minimum blob fees… pic.twitter.com/EcFaDD8zJY
— Cygaar (@0xCygaar) August 31, 2024
The implementation of EIP-4844 during the March hard fork Dencun significantly reduced fees for L2 solutions, particularly those using Rollups technology. Networks gained the ability to use binary data arrays when accessing the base data availability layer.
Prior to the update, rollups were the largest consumers of gas in Ethereum, which increased ETH burning and deflationary pressure, noted Cygaar. After the hard fork, L2 networks began actively using BLOB objects, which were “practically free” for them, and the cryptocurrency became inflationary again, the expert emphasized.
Back in May, analysts at CryptoQuant noted that since early April, the market supply of ETH began to grow. Researchers from Galaxy Digital in their report “150 Days After Dencun” stated that Ethereum’s average revenue fell by 69% compared to the same period before the upgrade.
According to Cygaar, L2 solutions benefit from the security of the base network “without contributing much to ETH.” He described these relationships as “one-sided.”
The expert believes that in the short term, increasing the minimum fee for BLOB transactions could be a solution.
“L2s should pay a certain amount for using Ethereum’s data availability layer. People might argue that increasing costs will lead L2s to alternative solutions, but I would say that protocols that truly want to inherit Ethereum’s security will still incur these costs,” Cygaar asserted.
The second path he mentioned was the increased use of L2 solutions, which would result in more “adequate” pricing for BLOB operations. However, this is only possible in the long term.
Opinions Divided Among Users
Ethereum community member Ryan Berckmans disagreed with the need to raise the minimum fee for transactions with arrays.
Good overview… I don’t think there’s a decision to make here — we’re simply going through the initial launch phase of blobspace and L2 maturation.
Increasing the minimum blob fees (eg via an EIP hastily included in Pectra)
would imo be a knee-jerk reaction based on a mere 5…— Ryan Berckmans ryanb.eth (@ryanberckmans) August 31, 2024
“In my opinion, this would be a knee-jerk reaction based on just five months of data,” he stated.
Berckmans noted that the growth statistics of the L2 ecosystem are “excellent and will inevitably lead to saturation with BLOB objects,” increasing Ethereum’s revenue from operations with them.
Doug Colkitt, founder of the DeFi protocol Ambient Finance, doubted that a surge in demand for data array space would lead to higher fees. He referred to the dominance of low-value transactions in L2 networks, which he called spam.
Many are holding out hope that the post-4844 shift of Ethereum from deflationary to inflationary will reverse if blobspace demand just increases a little more to become saturated.
Unfortunately, saturation is unlikely to lead to any meaningful increase in Ethereum burn. Spend 5… https://t.co/1QqJtbe1RZ pic.twitter.com/um2lIe5njU
— Doug Colkitt (@0xdoug) August 30, 2024
Increasing the number of large transactions could be a solution, but this seems unlikely in the foreseeable future, added Colkitt.
Investor Hunter Orrell supported Cygaar’s idea. In his view, Ethereum as the first layer “seems to bear all the costs” in the current situation.
A user under the pseudonym asym also advocated for introducing a base fee for BLOB transactions in L2 networks, considering the computing resources consumed.
I think setting a floor fee makes sense given that computing resources are required for nodes to process blobs. It should be low enough that L2s can still achieve sub cent transaction fees.
As it stands today, if blob space fills up and L2 transaction fees get expensive again,…
— asym ?️ (@0xAsym) August 31, 2024
Analyst technoir noted that dynamically adjusting fees for blockchain processing of array operations seems like “a good interim step” while waiting for increased demand for block space.
Ethereum developers have scheduled the next network update after Dencun, called Pectra, for the first quarter of 2025.