In the recent Ethereum Execution Layer Meeting 195, a proposal was discussed regarding an adjustment to the base fee for blob gas, introduced by EIP-4844 as part of the Cancun upgrade. Blobs are a new type of data storage designed to make data storage and processing on Ethereum more affordable.
Currently, the minimum base fee for blobs is set at 1 wei. Researcher Max Resnick proposed increasing this fee to accelerate price adjustments during network congestion.
Raising the Blob Base Fee: Cure or Catastrophe?
The blob base fee represents the minimum cost required to process blob data on Ethereum. Since the implementation of EIP-1559, Ethereum’s gas fee structure has undergone significant changes.
Previously, transaction fees were determined through bidding, where users offered higher fees for prioritization during network congestion. This often led to unpredictable spikes in fees.
EIP-1559 split transaction fees into two parts: the base fee, which gets burned, and the priority fee, which is paid to miners but not destroyed. The base fee adjusts dynamically with network congestion, providing more predictable costs while slowing Ethereum’s inflation by burning ETH.
Raising the minimum blob base fee means that even in low-congestion periods, the cost of processing blob data will not fall below a certain threshold, potentially leading to increased ETH burn.
Max proposed increasing the base fee from 1 wei to 160,217,286 wei to reduce the time it takes for prices to reach equilibrium during congestion. He argued that the current system is too slow in adjusting from a base of 1 wei, taking around 160 blocks (or about 32 minutes) to reach reasonable prices.
By starting from a higher base fee, price discovery would accelerate, enabling Ethereum to handle congestion more effectively without significantly increasing the final cost of blob gas.
Community Reactions
The proposal sparked heated debate within the community. Ryan Berckmans opposed raising the blob base fee, arguing that Ethereum’s current strategy is to offer low-cost or even free data availability (DA) during periods of low congestion.
This approach is designed to attract more users and developers to the network, helping Ethereum build network effects and capture market share. He cautioned that increasing fees would create higher barriers to entry and reduce Ethereum’s neutrality, especially since the blob market is still stabilizing.
Others, such as the Blockworks team, believe raising the base fee could harm Ethereum’s competitiveness in providing DA services. They advocate for scaling Ethereum’s Layer 1 (L1) to increase execution costs while keeping DA services affordable. This, in their view, would strengthen Ethereum’s overall position, attracting more Rollups and expanding ETH’s utility.
Meanwhile, Nethermind contributor Bena Adams supported the fee increase, noting that a 1 wei base fee is not practical during periods of congestion. Although the economic difference between 1 wei and 1 gwei may seem trivial, the slow fee adjustment process under current conditions fails to respond adequately to network demand.
Ethereum researcher Potuz added that if the base fee were set by the Consensus Layer (CL) rather than the Execution Layer (EL), it would likely have been set to a higher value like 1 gwei. The CL uses uint64 data types, which lack the precision to handle extremely small values like 1 wei. If the CL had set the fee, this debate might not have arisen.
Will Raising the Blob Fee Alleviate ETH Inflation?
Proponents of raising the blob base fee argue that it could help reduce Ethereum’s inflation pressure. For instance, Cygaar from the Abstract team noted that before EIP-4844’s implementation, Rollups were the main source of Ethereum gas consumption.
However, under the current pricing structure, blob data is nearly free for Rollups, providing minimal value to Ethereum in terms of fee revenue.
In the short term, increasing the blob base fee could raise ETH burn rates, thus reducing inflation. However, Doug Colkitt, founder of Ambient, pointed out that despite 80% of Ethereum’s blob space being utilized, much of it is filled with low-value spam transactions.
These transactions are highly sensitive to fee increases, meaning even a slight rise in blob fees could cause them to disappear, ultimately leading to negligible gains in ETH burn.
When Will ETH Become Deflationary?
Putting blobs aside, how high must Ethereum’s base fees go for ETH to become deflationary?
ETH’s total supply is uncapped, and under the Proof-of-Stake (PoS) mechanism, ETH issuance depends on the amount of ETH staked and overall network activity. Increased staking results in higher issuance, while EIP-1559’s burn mechanism helps offset issuance by burning a portion of the base fees.
Ethereum’s issuance rate currently ranges from 0.5% to 2% annually, depending on the number of staked ETH and network activity.
ETH will become deflationary when the amount of ETH burned exceeds the annual issuance. The formula for burn per block is:
Base Fee × Block Size (Target: 15,000,000 Gas)
The annual burn rate is:
ETH Burn Per Block × Blocks Per Year (Approx. 2,620,000 based on 12.05s block time)
Assuming an annual issuance rate of 1% and a current total supply of 120,330,000 ETH, roughly 1,203,300 ETH needs to be burned annually to achieve deflation. For ETH to become deflationary, the base fee must be:
Base Fee × 15,000,000 × 2,620,000 > 1,203,300
From this, the base fee needs to be approximately 30.62 gwei for ETH to start deflating. If the issuance rate is 0.5%, the base fee would need to be around 15.31 gwei, and for a 2% issuance rate, it would require a base fee of 61.23 gwei.
Conclusion
The debate over raising the blob base fee touches on fundamental issues related to Ethereum’s scalability, inflation control, and network incentives. While increasing the base fee could accelerate price discovery and reduce ETH inflation, it also risks limiting the accessibility of Ethereum’s DA services, which are crucial for future Rollup adoption. The path forward will require a careful balance between encouraging network activity and managing inflationary pressures on ETH.
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