- Ethereum (ETH) blobs are nearing a key demand ceiling.
- The rising metric has sparked some optimism in the Ethereum community.
- Blob demand must remain high for an extended period for ETH’s price to reap any benefits.
As Gen Zs would say, the vibes in the Ethereum (ETH) community haven’t been bussin’ lately. With the asset consistently underperforming fellow market leaders Bitcoin (BTC) and Solana (SOL) and losing its deflationary status , many have questioned its investment thesis .
Amid the doldrums, however, some are looking to a potential shift in the blob market to ignite excitement in the community again.
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Can heightened blob demand put the wind back in ETH’s sails?
Blob Count Nears “Target”
Ethereum (ETH) blobs, a cheaper way for Layer 2 chains to settle transactions on the Layer 1 chain, are nearing a key demand ceiling. As highlighted by a couple of community members on Wednesday, October 19, the average blob count is nearing the “target,” according to Dune Analytics data , a move that could have significant implications for Ethereum’s price.
What is this target?
The Dencun upgrade introduced a separate fee market for blobs, where, like the traditional gas market, the blob base fee is determined by blob demand, which is reflected by the number of blobs attached to a block. In this system, the threshold, otherwise called the target, is set at three blobs per block. The blob base fee is increased when the amount of blobs attached to a block exceeds three. Below the target, the fee is decreased, while at the target, the fee is unchanged. For context, each Ethereum block can have a maximum of six blobs.
So, what does the blob base fee dynamic have to do with ETH?
Like the Ethereum mainnet’s burn mechanism , which burns the base fee paid for transactions, base fees paid for blobs are also removed from the circulating supply and, in theory, set ETH on the path to deflation. Below the target, however, blobs are considered free and, as such, have a negligible impact on burns, making a move above the target key to watch.
The recent growth in blob demand comes as more Layer 2 chains appear on the scene, and activity continues to grow on blockchains like the Coinbase -incubated Base . According to data shared by Coinbase Head of Product Business Operations Conor, over 100 Ethereum Layer 2 chains are now vying for blob space. As highlighted by Dragonfly data analyst “hildobby ,” Base alone uses up to 28% of the blob target, posting over 6,000 blobs daily.
Is “Blob Price Discovery” the Catalyst ETH Needs?
Reacting to the recent data on the growing average blob count, Socket Growth Lead Lito Coen asserted that it would be “insanely bullish for ETH.”
"we’re at a tipping point right now. if L2 demand continues to grow at this rate blob fees will enter price discovery very soon. insanely bullish for $ETH," he enthused.Similarly, Bankless podcast host Ryan Sean Adams suggested that the data on growing blob demand hinted that ETH detractors would soon be disappointed.
"I'm guessing 99.9% of ppl telling you ETH IS DEAD on this app have no idea what 'blobs almost at target' mean and if you want to take investment from them hf but for those who know this is alpha," he wrote.Despite these sentiments, for ETH’s price to reap any benefit from the blob count reaching the target, blob demand must remain high for an extended period, which may be challenging to achieve as several Layer 2 chains still struggle to find product market fit.
At the same time, as highlighted by OneBalance community lead “Juve,” continued high blob demand, which would lead to higher Layer 2 chain costs, could be bad for Layer 2 chains. Lower transaction costs have been one of the main reasons investors have migrated from other chains like Solana to Ethereum Layer 2 chains in the first place. “the trend reversing is bearish,” Juve asserted.
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