How Ethereum Blobs Reduce Gas Fees of Layer 2 Solutions

How Ethereum Blobs Reduce Gas Fees of Layer 2 Solutions

Discover how Ethereum Blobs enhance scalability with lower gas fees and faster transactions for layer 2 solutions built atop its...

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In the world of Web3 and blockchain technology, Ethereum stands out as the biggest smart contract platform  around, and it’s totally transformed the scene with its decentralized apps (dApps) and smart contracts. As a major player in the blockchain arena, Ethereum has not just opened doors to new, innovative solutions—it’s also ignited a surge of creativity and exploration in the decentralized world.

Plus, with its robust infrastructure and vibrant community, Ethereum continues to push the boundaries of what is possible in the digital world, offering a playground for developers, and non-developers to build the future of finance, governance, and beyond without the need for intermediaries.

Now envision a world where data storage on the Ethereum ecosystem becomes more efficient, scalable, and versatile! This is where blobs come into play – a concept that opens up new routes for storing and managing data on Ethereum to improve the speed and lower costs for solutions built atop its network.

Layer 2 Solutions

Ethereum is on a mission to balance scalability, security, and decentralization. But as more users jump on board, we’ve seen those dreaded gas fees climb, really spotlighting the network’s scalability limits. Enter Layer 2 solutions—Ethereum’s hopeful answer to these growing pains.

Off-Chain Efficiency

Layer 2 solutions are designed to process transactions off-chain to mitigate the limitations of the Ethereum mainnet, which can suffer from congestion and high gas fees during peak times. By processing transactions off-chain, these solutions can handle much higher volumes of transactions at a lower cost.

On-Chain Settlement

While transactions are processed off-chain, the finality and security of these transactions are still dependent on the Ethereum mainnet. This is where blobs come into play, by storing significant data on-chain that can be referenced to validate and finalize off-chain transactions. This approach ensures that even though the bulk of transaction processing is done off-chain, the integrity and security are maintained through periodic settlements or proofs to the main chain.

What are Ethereum Blobs? 

Ethereum has traditionally stored all Layer 2 (L2) transaction data within Layer 1 (L1) using CALLDATA. However, the primary limitation with CALLDATA is its restricted space, which requires all data to be processed and stored by Ethereum nodes, leading to significant data availability costs. This data storage is not only expensive but often only temporarily necessary, predominantly used for activities such as fraud proofing and other validation processes essential to maintaining the network’s integrity.

From a cost perspective, approximately 60% of L2 transaction costs and associated gas fees have been driven by the demands of storing high volumes of data within CALLDATA. This storage requirement has historically contributed to high operational costs for running applications on Ethereum, impacting scalability and efficiency.

To address these challenges, EIP-4844 introduces a new concept called “data blobs” as an efficient alternative to CALLDATA for the settlement of L2 network transactions. The introduction of blobs is designed to significantly enhance Ethereum’s scalability by providing a cheaper method for storing large data sets that are critical for L2 operations but do not need permanent retention on the L1 blockchain. This approach aims to reduce the overall transaction fees by decreasing the gas costs associated with data storage. The objective is to develop a new framework with increased block space, enabling Layer 2 (L2) scaling solutions to process more off-chain transactions more efficiently and at a lower cost.

The Working of Ethereum Blobs

Blob-carrying transactions on Ethereum include an additional payload that contains the blob itself, along with its reference. The blob consists of large data chunks directly embedded within the transaction, stored on-chain to ensure complete data availability. The integrity of each blob is guaranteed by cryptographic hashes included in the transaction, verifying that the data has not been altered. To access a blob, you simply refer to the transaction containing it on the blockchain. This setup enhances the blockchain’s functionality by allowing it to securely and efficiently handle large-scale data, similar to having direct access to the contents of a safe.

Unlike the CALLDATA approach, blobs are designed not to compete for gas with regular Ethereum transactions and are proposed to be automatically pruned from the blockchain after approximately 18 days. This approach significantly improves data availability and reduces costs for Layer 2 solutions, representing a substantial advancement in Ethereum’s scalability and efficiency

Blobs on Ethereum introduces several vital features that optimize data storage and management within its vast ecosystem.

Capacity and Utilization

  • At the time of this writing, each Ethereum block can accommodate up to a total of 6 blobs.
  • Each blob will be designed to store up to 128 KB of data, although the full capacity may not always be utilized
  • The Ethereum network supports three fundamental types of transactions in its mempool ranging from type-0 to type-2. These involve transferring P2P/crypto transactions between accounts, deploying new smart contracts, and executing interactions with existing smart contracts.
  • Type-3 transactions, also known as blob-carrying transactions, reside in the Ethereum mempool alongside other transaction types. However, unlike typical transactions, the actual contents of the blobs are disseminated through a consensus client’s blob sidecar. This sidecar mechanism is separate from the execution client, ensuring that blob data handling is distinct and optimized for efficiency
  • Type 3 transactions are designed to include the actual blob data within the transaction itself and embed large data packets directly on-chain. By storing this data within the blockchain, Ethereum aims to support more efficient and scalable off-chain computations while maintaining the security and decentralization of the network

Impact on Stakeholders

  • Blobs open new possibilities for developers to create more intricate and data-intensive smart contracts without being hindered by exorbitant gas costs.
  • For users, the reduced fees resulting from more efficient data handling, enhance the accessibility and appeal of both the layer 2 solutions and the underlying layer 1 (Ethereum) to a broader audience.
  • For Ethereum Validators, blobs are expected to allow for optimized disk space usage, as they are pruned approximately two weeks after creation

Benefits of Ethereum Blobs 

With the Dencun upgrade, Ethereum aims to improve the efficiency of Layer 2 (L2) transactions by utilizing blobs for data storage instead of relying on CALLDATA. This approach is akin to moving data into a larger, more efficient storage unit, reducing congestion and potentially lowering fees. Further, there is a potential for these blobs to be automatically cleared out every month, which helps cut down on clutter and reduce fees. 

By optimizing how data is stored, blobs are expected to significantly reduce the gas fees for L2 transactions. This is achieved by minimizing the amount of data that needs to be processed and stored in the more expensive and congested L1 environment. Further, L2 transactions could bypass the congested CALLDATA storage, opting instead for blob storage. This shift would not only lower storage costs but also potentially increase the throughput of transactions by reducing the load on the main Ethereum chain.

Plus, this setup can free up more block space, thereby speeding up transaction processing. The aim is to accommodate a significant number of blobs per block — up to 64, according to some proposals. This could substantially increase Layer 2’s processing capabilities, enhancing not just the L2’s throughput but also Ethereum’s throughput. Such a blob strategy is a pivotal step towards addressing Ethereum’s scalability challenges, aiming to do so without compromising its core principles of security and decentralization.

Challenges and Considerations 

Technical Challenges:

  • Implementing a secure, reliable, and fully decentralized storage solution for blobs on-chain is crucial, which requires attention to data encryption, access control, and auditing to ensure data integrity
  • Creating a fair and efficient fee structure for blob transactions must be ensured so that costs are reasonable and do not discourage their use, particularly in relation to the storage and processing of large data sets.
  • Compatibility with existing Ethereum infrastructure, such as wallets and blockchain explorers, is vital for seamless integration and widespread adoption.

Non-technical Challenges:

  • Educating the Ethereum community about blobs’ advantages through precise documentation and tutorials is critical to fostering understanding and adoption.
  • Encouraging dApp developers to embrace blobs by providing support and resources can drive adoption and utilization.
  • Addressing potential centralization issues related to the management and storage of blobs, focusing on creating and maintaining decentralized governance and operational mechanisms to preserve Ethereum’s foundational principles is crucial

Conclusion 

The Dencun upgrade on Ethereum could revitalize the Layer 2 (L2) ecosystem by boosting their throughputs and lowering transaction fees. These early stages are pivotal in addressing scalability challenges, leading to faster and more cost-effective transactions as Ethereum moves toward full Danksharding implementation. This transition could also lead to scenarios where not all data is stored directly on Ethereum’s main blockchain, meaning individual nodes might not maintain a complete, eternal record of all such data.

Blobs are a promising addition to Ethereum, offering an efficient data storage solution to enhance scalability and performance. They are designed to handle large datasets directly on-chain, improving how data-intensive operations are managed within the blockchain. This integration happens through blob-carrying transactions, which are akin to standard Ethereum transactions but with a twist: they include a large data field within the transaction itself. Once included in a block, the entire blob is stored on-chain, ensuring that all data remains accessible and secure, facilitating efficient data usage without relying on external storage solutions.

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