ETH inflation dilemma: caused by the success of Cancun upgrade?

Author: 0xNatalie Source: Chainfeeds

Ethereum Execution Layer Meeting 195 discussed a proposal to adjust the minimum value of the blob base fee. Blob is a data storage type 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 to increase this minimum fee to speed up fee adjustments when the network is congested.

Increasing the blob base fee: Is it a cure or a poison to quench thirst?

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, and the higher the user's bid, the higher the priority of their transaction to be included in 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 of each transaction is 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 increase accordingly, making the transaction fee more predictable, while slowing its inflation by destroying some 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 fall below this minimum even when the network is idle. Raising this minimum value will increase the cost of L2 submitting data to the main chain, and in theory will burn 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). 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 View

This proposal has aroused heated discussions in the community. Ryan Berckmans opposed 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 blob market is not yet fully stable, so this adjustment should not be made hastily.

D of the Blockworks team 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 the credibility of Ethereum 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 the fees will increase with congestion in theory, 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.

Potuz, an Ethereum researcher, pointed out that if the beacon chain (CL) rather than the execution layer (EL) sets this fee, the minimum fee may be set directly to 1 Gwei (i.e. 1 billion wei), and the beacon chain uses the uint64 data type instead of uint256 when processing fees. uint64 has low precision when processing decimals, so extremely small values ​​like 1 wei are usually not used as the minimum unit of fee. So if the initial fee was set by the beacon chain, there might not be such a dispute caused by the minimum fee unit being too small.

Can it really alleviate ETH inflation?

In addition, the view that supports raising the minimum base fee for blobs also believes 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 EIP-4844 is implemented (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. A short-term solution is to increase the blob base fee, increase burn and thus reduce ETH's inflationary pressure.