Ethereum Blobs Are ‘Insanely Bullish” For ETH Price: Breakthrough Research

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As a seasoned crypto investor with over a decade of experience in this dynamic and ever-evolving market, I find Tim Robinson’s analysis on the potential impact of Ethereum’s blobs exceptionally captivating. His simulations not only offer a glimpse into the future but also provide a roadmap for understanding the long-term implications of these innovative features.

Tim Robinson, the Chief Crypto Researcher at BlueYard Capital, has shared innovative simulations suggesting that Ethereum‘s use of “blobs” might significantly boost ETH‘s long-term value. In a sequence of posts on platform X, Robinson emphasized how blobs could transform Ethereum’s scalability and economic structures.

Robinson mentioned that there’s been much debate over these ‘blobs’, yet nobody has shown how they react to demand… until this point. In essence, he believes that ‘blobs’ are incredibly optimistic for Ethereum in the long run.

Why Blobs Are ‘Insanely Bullish’ For Ethereum Price

In simpler terms, Blobs are large data structures proposed in Ethereum Improvement Proposal (EIP)-4844. These structures are designed to improve the network’s efficiency by storing and processing data off-chain, which is crucial for scaling solutions on Layer 2 (L2). This setup allows these solutions to provide reduced transaction fees while ensuring security through Ethereum’s consensus mechanism.

Robinson’s model suggests that Ethereum could handle approximately 10,000 transactions every second, consuming about 6.5% of its entire Ether supply each year. In this situation, Layer 2 transactions typically cost around $0.06. This proposed scenario aligns with the medium-term objectives Ethereum co-founder Vitalik Buterin outlined in his recent “The Surge” blog post, which includes a block size of approximately 16 MB of data per block.

Robinson explained, “Indeed, Ethereum is currently handling transactions at a rate of 10,000 per second, reducing by 6.5% annually. Transactions via L2 (Layer-2) cost an average of $0.06 each. Moreover, each block contains about 16 MB of data known as ‘blobs.’ As the Ethereum ecosystem expands, you might find it hard to believe that some consider L2 solutions parasitic and that Vitalik didn’t anticipate this. But wait till you see what happens when Ethereum reaches its full potential!

A key insight from Robinson’s research is the rapid escalation of ETH burning as blob usage increases. “It’s interesting how quickly blobs go from being free to burning a ton of ETH. It seems almost everyone doesn’t understand this tipping point. It also makes me think there might be a better pricing mechanism,” he observed.

Robinson offers a demonstrative simulation model that showcases the accelerating burn rate of ETH, as the number of transactions per second (TPS) grows from its current approximately 180 TPS to 400 TPS. The data indicates an increase in burned ETH, rising from around 4 ETH daily to approximately 1,832 ETH daily.

It’s interesting how quickly blobs go from being free to burning a ton of ETH. It seems almost everyone doesn’t understand this tipping point. It also makes me think there might be a better pricing mechanism.

Here’s what it looks like increasing from today’s ~180TPS to 400TPS

— Tim Robinson (@timjrobinson) October 29, 2024

The capacity for scalability improves significantly due to the adoption of Peer Data Availability Sampling (PeerDAS), a method that enables blob storage to expand in accordance with the number of validators. As Robinson clarified, “Since total blob capacity is directly proportional to the total number of validators, once PeerDAS is in place, blobs can expand to any extent required.” He further added, “With over 10,000 nodes available to distribute the workload among them, Ethereum will offer an affordable and plentiful block-space experience while maintaining a highly deflationary nature.

In my research, I’ve stumbled upon an intriguing feedback mechanism involving Ethereum (ETH) prices and its burn rate. It seems that when ETH prices lower, the transaction volume increases, leading to a surge in the burn rate. This is because reduced transaction costs make more transactions feasible, thus escalating the burn significantly. It’s fascinating to observe how the burn rate changes from $2k ETH to $10k ETH levels.

Another interesting feedback loop is the lower the ETH price, the higher the burn! As transaction prices are lower, more transactions are made, and the burn soars. See how different the burn is with ETH at $2k vs ETH at $10k:

— Tim Robinson (@timjrobinson) October 29, 2024

In simpler terms, Robinson explained that the value of ETH is likely to increase because it’s highly useful, scarce, and deflationary with over 10,000 teams developing on Ethereum. Long term, he believes that ETH has the strongest foundational strengths in the world, but it requires time for these advantages to fully manifest.

The study generated excitement and lively debates among members of the ETH community. Mat (@materkel) opined on topic X: “This will be extremely captivating once we reach blob capacity. I believe many L2s are yet to determine how to manage this situation effectively and fairly charge their users. There will be numerous inefficiencies to address; previously, we didn’t have multiple competing L2s in this context. After the chaos subsides, we’ll have a clear understanding of pricing for both fees on L2s and blobs on L1.

Robinson underscored the significance of preemptive examination, saying, “Indeed, that’s correct! I aim to provide the necessary data for us to address potential issues before we encounter them. The market tends to stabilize with more data points, but in the initial stages, fees might experience significant fluctuations.

At press time, ETH traded at $2,638.

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2024-11-01 04:17