The Impact of Blobs on Ethereum Layer 2 Fees

Ethereum faces limitations regarding transaction output, confirmation times, and general network capacity, similar to many other blockchain networks. However, the recent implementation of the Dencun upgrade could potentially offload some data storage and transaction processing from the blockchain’s primary layer.

Dencun’s Proto-Danksharding introduces blobs that improve Ethereum’s scalability and increase L2 data handling capacity at reduced fees. This guide explores the potential positive impact of blobs on Ethereum gas fees across numerous Ethereum layer-2 networks such as Optimism, Polygon, Arbitrum, Base and more.

Remember, if you’re interested in the Ethereum ecosystem, you can use a secure crypto wallet, such as Trust Wallet to buy, sell, and manage Ethereum (ETH) and tokens on Ethereum Layer 2 protocols.

Understanding Blobs and Proto-Danksharding

Data blobs, short for Data Binary Large Objects, is a computer science concept that involves storing large data types like documents, multimedia files, and different structured or semi-structured data forms.

The recent introduction of Proto-Danksharding on Ethereum via EIP-4844 (Ethereum Improvement Proposal) presents blobs that enhance the blockchain's data storage and handling capacity.

Proto-Danksharding splits Ethereum blocks into smaller shards to make blocks larger by introducing more space, thereby reducing the workload on nodes. This Danksharding design involves a single validator who fragments the blocks before dispersing them to all the data shards. The aim is to create a novel landscape with additional block space to enable Layer 2 (L2) scaling solutions to process more off-chain transactions cost-effectively.

Ethereum’s Dencun upgrade leverages blobs to offer rollups a temporary scaling relief. The process addresses the network’s scalability challenges, making L2 transactions cheaper and more efficient.

Specifically, Proto-Danksharding introduces a “blob-carrying” transaction, which creates extra space for data in transactions by limiting the number of blobs per block to 16, with a maximum of 128 KB each, thereby adding at least 2MB of space to each block.

How Blobs Could Reshape Layer 2 Fees

Ethereum previously stored all L2 transactions in L1 CALLDATA. However, the downside of CALLDATA is its limited space. All data therein must be processed by Ethereum nodes and stored on-chain, leading to excessive data availability costs.

Theoretically, permanently storing L2 transaction data on the expensive Ethereum L1 is unnecessary; such storage is only temporarily required for fraud proofing and other validation requirements.

In terms of costs, Ethereum L2 transactions lacked proper storage. From a data perspective, up to 80% of L2 transaction costs and gas fees involved high data storage costs in CALLDATA.

EIP-4844 introduces data blobs that can be used for L2 network settlement instead of CALLDATA to solve Ethereum’s scalability issues. The primary benefit of this development is reduced Ethereum gas fees for the L2s since blobs significantly reduce posting costs, ensuring that the fees remain at the near minimum most of the time.
With the Dencun upgrade, L2 transactions are directly submitted to blobs for storage instead of competing for CALLDATA space. Moreover, blob data gets deleted automatically after one month, reducing redundant storage overheads and reducing transaction fees while increasing transaction output by expanding block space for L2 solutions.

Should the developer’s goal of eventually attaching 64 blobs per block be achieved, the upgrade will increase L2’s throughput by up to 40 times.

The Future Development of Blobs and Fee Reduction

The deployment of the Dencun upgrade on Ethereum has the potential to bring fresh momentum to the L2 ecosystem. Besides accelerating the blockchain’s throughput and significantly reducing fees, the development could bolster L2 projects and facilitate the growth and adoption of the entire Ethereum ecosystem.

Proto-Danksharding, a forerunner to full Danksharding, involves implementing the necessary frameworks, such as verification rules and transaction formats, before sharding. The resulting enhanced scalability and lower transaction fees will create enhanced user experiences and faster transactions, making Ethereum more attractive to DeFi, NFTs, and other applications.

By helping address issues related to scalability, these initial stages represent a ground-breaking development by facilitating faster and more affordable transactions as the Ethereum ecosystems move towards eventual full Danksharding.

As the Ethereum blockchain matures in a world that demands low costs, speed, and efficiency, the role of L2 solutions becomes ever more critical, especially as these secondary layers make the possibility of blockchain interoperability a reality.

While the Dencun upgrade aims to solve these issues, it faces potential challenges such as:

• Bugs: Developers will proceed cautiously to minimize risks associated with potential bugs.

• Unpredicted demand: Lower fees could spark erratic usage and strain capacity.

• Interoperability: Facilitating healthy interaction between L1 and L2 systems with divergent features is a tall order.

• Capital migration: The upgrade could spur a massive capital migration that could disrupt markets in the interim period, irrespective of technical outcomes.

Conclusion

The Dencun upgrade promises to transform the Ethereum ecosystem, especially in processing and validating transactions.

By dividing the network into smaller parts called “shard chains” that facilitate the simultaneous processing of transactions, Proto-Danksharding will improve user experience, expand the blockchain’s use case potential, increase the network’s capacity to handle more transactions per second, and help reduce L2 fees.

As Ethereum grows, users can expect more developmental upgrades to the blockchain. Staying up-to-date with emerging upgrades is essential for any user who wants to remain relevant within the blockchain ecosystem. Node operators, who are especially critical in the ecosystem, must keep up with developments like EIP-4844 to take full advantage of new protocol changes while taking cautious steps to guarantee a smooth transition.

If successful, the Dencun upgrade is poised to improve scalability and increase Ethereum’s adoption. Still, the upgrade is in its infancy, and it remains to be seen how much of an impact the introduction of blobs will have on the Ethereum ecosystem.

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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.