The post Ethereum’s inflation ‘problem’ – Here’s why blobs have divided the community appeared on BitcoinEthereumNews.com.

ETH’s inflation remains elevated after the implementation of the blobs in March Analysts are divided on how to address inflation with the low-cost blobs Analysts and insiders are calling for a revision of the current Ethereum [ETH] blobs to mitigate inflation and allow the second-largest altcoin to accrue value for its L2s (layer 2s).  Once praised for making L2s more efficient and significant transaction costs in the ecosystem, Ethereum blobs are now being scrutinized for escalating ETH inflation. In fact, one such analyst, Cygaar, believes that the current relationship between ETH and L2s is lopsided.  “Right now, the relationship between Ethereum L1 and its L2s is quite lopsided. L2s receive the benefits of Ethereum security without contributing much value back to ETH.” The problem with Ethereum blobs For context, before blobs, L2s were major ETH gas consumers. As part of Ethereum’s fee structure, the high gas usage also led to a high burn rate (removal of part of generated ETH from circulation). The net impact was deflationary to ETH.  However, blobs made heavy transactions on L2s relatively cheaper, reducing gas usage on L1 and affecting the burn rate. With a low ETH burn rate, the once deflationary asset turned inflationary since blob implementation in March 2024.  Source: Ultra Sound Money Owing to the same, Cygaar suggested increasing blob fees in the short term.  “Perhaps more short-term, solution is to increase the base blob fee. L2s should have to pay some amount in fees to use Ethereum DA…I would argue that the chains that want to truly inherit Ethereum’s security will still pay these costs.” He added that increasing L2 usage could hike the ETH burn rate and help achieve deflationary status in the long run.  “If demand and usage of L2s increases, we may reach a state where the blob…

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Filed under: News - @ September 1, 2024 11:02 pm