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Tim Robinson, Head of Crypto Research at BlueYard Capital, has unveiled groundbreaking simulations indicating that Ethereum\u2019s implementation of \u201cblobs\u201d could be exceptionally bullish for the long-term price of ETH. In a series of posts<\/a> on X, Robinson highlighted how blobs could revolutionize Ethereum\u2019s scalability and economic dynamics.<\/p>\n \u201cMany people arguing about blobs, but so far no one has simulated how they respond to demand\u2026 until now,\u201d Robinson stated. \u201cTL;DR: Blobs are insanely bullish for ETH long term.\u201d<\/p>\n Blobs, introduced in Ethereum Improvement Proposal (EIP)-4844<\/a>, are large data structures designed to enhance the network\u2019s capacity by efficiently storing and processing data off-chain. This mechanism is pivotal for Layer 2 (L2) scaling solutions, enabling them to offer lower transaction fees while maintaining security through Ethereum\u2019s consensus.<\/p>\n Robinson\u2019s simulation projects Ethereum operating at 10,000 transactions per second (TPS), burning 6.5% of its total ETH supply annually, with L2 transactions costing an average of $0.06. This scenario involves 16 MB of blobs per block, aligning with Ethereum co-founder Vitalik Buterin\u2019s medium-term goals outlined in his latest \u201cThe Surge\u201d post<\/a>.<\/p>\n \u201cYes, that\u2019s Ethereum operating at 10k TPS, burning 6.5% a year while L2 transactions cost an average of $0.06, with 16 MB of blobs per block,\u201d Robinson elaborated. \u201cYou thought L2\u2019s were parasitic and Vitalik didn\u2019t think this through? Ah, sweet summer child, little do you realize how insane this will get when the Ethereum ecosystem really kicks into high gear.\u201d<\/p>\n A key insight from Robinson\u2019s research is the rapid escalation of ETH burning as blob usage increases. \u201cIt\u2019s interesting how quickly blobs go from being free to burning a ton of ETH. It seems almost everyone doesn\u2019t understand this tipping point. It also makes me think there might be a better pricing mechanism,\u201d he observed.<\/p>\n Robinson provides a simulation tool illustrating the ETH burn rate<\/a>\u2018s exponential growth as TPS scales from the current ~180 TPS to 400 TPS. The data shows burned ETH increasing from roughly 4 ETH per day to 1,832 ETH per day.<\/p>\n It\u2019s interesting how quickly blobs go from being free to burning a ton of ETH. It seems almost everyone doesn\u2019t understand this tipping point. It also makes me think there might be a better pricing mechanism.<\/p>\n Here\u2019s what it looks like increasing from today\u2019s ~180TPS to 400TPS pic.twitter.com\/fjuK19NL6y<\/a><\/p>\n \u2014 Tim Robinson (@timjrobinson) October 29, 2024<\/a><\/p>\n<\/blockquote>\n The scalability potential is further enhanced by the implementation of Peer Data Availability Sampling (PeerDAS), which allows blob capacity to scale with the number of validators. \u201cBecause total blob capacity scales with total validators, after PeerDAS is implemented, blobs can scale as high as needed,\u201d Robinson explained. \u201cThere are 10k+ nodes to shard the load between them. While other ecosystems struggle under load, Ethereum will supply the world with cheap, abundant block-space while being extremely deflationary.\u201d<\/p>\n An intriguing feedback loop identified by Robinson is the inverse relationship between ETH price and the burn rate. \u201cAnother 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,\u201d he noted. \u201cSee how different the burn is with ETH at $2k vs ETH at $10k\u201d.<\/p>\n 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: pic.twitter.com\/tbSbC6unwM<\/a><\/p>\n \u2014 Tim Robinson (@timjrobinson) October 29, 2024<\/a><\/p>\n<\/blockquote>\n Addressing the question of value accrual for ETH, Robinson stated, \u201cSo how will ETH accrue value? Being the most useful, scarce, deflationary asset with 10,000+ teams using Ethereum to grow their products will probably do it. Long term, ETH has the best fundamentals in the world; it just takes time for them to play out.\u201d<\/p>\n The research sparked enthusiasm and discussions within the ETH community. Mat (@materkel) commented on X: \u201cWill be extremely interesting once we hit blob capacity. My guess is a lot of L2s still need to figure out how to handle this case and properly fee their users. There will be a lot of inefficiencies to fix; we just didn\u2019t really have multiple competing L2s<\/a> in this scenario before. Once the dust settles, we\u2019ll have proper price discovery both for fees on L2s together with blobs on L1.\u201d<\/p>\n Robinson responded, emphasizing the importance of proactive analysis: \u201cYeah, absolutely! I\u2019m trying to bring the data so we can solve any problems before we get there. The market becomes more stable with more blobs, but in the early days, fees could be quite volatile.\u201d<\/p>\n At press time, ETH traded at $2,638.<\/p>\n Featured image created with DALL.E, chart from TradingView.com<\/p>\n<\/p><\/div>\nWhy Blobs Are \u2018Insanely Bullish\u2019 For Ethereum Price<\/h2>\n
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