Author: Donovan Choy, Blockworks; Translation: Wuzhu, Golden Finance

Running on Ethereum L2 has always been very expensive. L2 must pay millions of dollars in data availability costs to L1.

The Dencun Hard Fork (EIP-4844) in March 2024 changed everything. It introduced a block space extension called "blob" for L2, allowing bulk data to be published to L1 at very low cost. The Blob space is located in a different cost market than L1. It is about an order of magnitude cheaper than L1 Block space, making it a key aspect of Ethereum's aggregation-centric roadmap.

To illustrate this point, according to TokenTerminal's data, Base paid a fee of 9.34 million dollars in the first quarter of 2024, which sharply decreased to 699 thousand dollars in the second quarter of 2024, and further decreased to 42 thousand dollars in the third quarter of 2024.

The bad news (or is it good news?) is that as on-chain activity increases in the bull market, blob space is becoming somewhat expensive again.

Currently, the number of Blobs per Mainnet Block is limited to 6. When blob usage reaches 50% or the target limit of 3, a basic fee will be introduced to adjust the usage demands of hundreds of L2. When usage reaches 4 blobs, the basic fee for the next Block will increase by up to 12.5%.

This is exactly what has been happening over the past few weeks (see figure below).

In short, blobs are no longer free, and L2s need to start paying "rent". According to Ultrasound.money, Blob fees have consumed up to about 212 ETH in the last 30 days and generated a significant amount of Blob fees for the ETH Mainnet.

So blobs are usually great. The operating cost of L2 is lower, which is good news for L2 users.

But people (ETH holder) are not happy because it seems that L2 has not paid any fees to L1, which reduces the value of ETH assets.

The core of this complaint is a pessimistic mood, that the blob usage will be high enough to return value to L1, for two reasons:

• L2 is essentially a business. They will choose cheaper data availability providers like Celestia or EigenDA, or worse, centralized data availability committees (DAC) with weaker security properties.
• When the blob market becomes expensive, L2 will only latency send the data back to L1, just like we've seen Scroll and Taiko do in the past.

In the debate about blobs at Devcon, ETH researcher Ansgar Dietrichs acknowledged the inconsistency of L2 incentives, but countered that in the long term, as trust bottlenecks emerge around the bridge, more L2 networks will merge around it, making ETH's DA more important.

Tim Robinson of Blueyard also argues that 'blob is a loss leader'. He points out that although blobs currently do not generate much revenue, due to the economic design of blobs, they will soon generate revenue and bring huge dividends to Ethereum in the future. According to Robinson's Blob Simulator, assuming that ETH L1 processes 10,000 TPS and the Blob size is 16 MB (currently 125 KB), it will consume 6.5% of ETH every year.

The potential value appreciation of ETH is why, in the long run, blob is fundamentally beneficial to Ethereum. In the short term, restricting blob or increasing blob fees to extract more value from L2 is basically a bad rent-seeking idea.

ETH researchers are determined to act. In an article published two days ago, ETH researchers called for a conservative increase to 4/6 blob or higher 6/9 blob numbers.

In ACDE #197, Vitalik also proposed to add 33% blob space in the next Pectra hard fork, warning that this is crucial. Otherwise, users will leave for other chains.

In short, the complex debate surrounding blobs boils down to a simple question: Does Ethereum want to prioritize regular L2 users and their 'ETH-like' L2 ecosystem, or prioritize the value accumulation of ETH assets.

ETH researchers believe that prioritizing the latter could lead to users and developers switching to cheaper chains and consequently doubling the expansion of blob space in the long run. However, this undermines the perception of ETH as an economic asset and consequently angers ETH Token holders in the short term.

Whichever way, this is a tricky situation for Ethereum, which requires a daunting task of predicting the future and considering countless "what-if" scenarios. Time will tell which way is the right one.