EIP-7742: Ethereum Developers Propose Dynamic Blob Gas Targets to Enhance L2 Transactions

Christine Kim, Vice President of Research at Galaxy Digital, shared details of the proposal via Twitter on Oct. 17 following Ethereum’s “All Core Devs” meeting.

Christine Kim, Vice President of Research at Galaxy Digital, shared details of the proposal via Blockworks on Oct. 17 following Ethereum’s “All Core Devs” meeting. The EIP will allow the Ethereum consensus layer to dynamically adjust Blob gas targets and maximum values, which is expected to enhance the efficiency of Layer 2 (L2) transactions.

Blobs were first introduced in Ethereum’s Dencun upgrade on March 13, 2024, via EIP-4844. The goal of this addition is to reduce the cost of L2 transactions by incorporating large, temporary data chunks into Ethereum transactions. However, the fixed blob count is nearing its limit, and Vitalik Buterin, the co-founder of Ethereum, expressed concerns that this limitation could hinder scalability if not addressed quickly.

According to Kim, the EIP-7742 update, which may be included in the Pectra upgrade, could increase the blob count. However, other potential scalability improvements, such as altering the gas limit or slot time, are unlikely to be included in this fork.

On GitHub, Ethereum developer Alex Stokes further elaborated that a more flexible target value for blob parameters would reduce the rigidity caused by the current fixed limits. The Pectra fork is anticipated to roll out by the end of 2024 or early 2025.

Another proposal, EIP-7623, aims to create more space for Blobs by reducing Ethereum’s maximum block size from 2.7 MB to around 1 MB. This effort aligns with Buterin’s broader objective of enabling Ethereum to achieve 100,000 transactions per second by combining mainnet and Layer 2 scaling solutions, which forms a crucial part of Ethereum’s “The Surge” strategy.

Layer 2 Scaling Impact on Ethereum’s Revenue

Despite promising cheaper transactions, Layer 2 scaling methods come with their own set of drawbacks. As Layer 2 networks assume a larger role in the ecosystem, Ethereum's revenue share from transactions has significantly decreased.

In an Oct. 17 post on Blockworks, Matthew Sigel, Head of Digital Asset Research at VanEck, highlighted this shift in the revenue dynamic. Over the last four months, the revenue split between Ethereum mainnet and Layer 2s has completely reversed from the anticipated 90:10 ratio to 10:90.

This development forced Sigel to revise VanEck’s earlier bullish prediction that Ether would surpass $22,000 by 2030, which was estimated based on the assumption of a 90:10 revenue split—the exact opposite of what's happened over the last four months. If that split remains the same, he said VanEck’s Ether price target would drop by 67%, down to $7,330.

The situation could worsen further with one of Ethereum’s largest revenue drivers, decentralized exchange Uniswap, pivoting away from Ethereum by creating its new layer 2 “Unichain.”

According to FxStreet, US spot Ethereum ETFs experienced three days of inflows and one day of minor outflows, totaling up to $79.9 million by Thursday. Tracking ETF flows can provide useful information about institutional opinion toward Ethereum, but the current level of inflows must increase dramatically before it can have a significant impact on its price.

Compared to other cryptocurrencies, Ethereum’s price has not performed as well since the bull market began in late 2023. Two reasons for this shortfall are the lukewarm debut of US-listed spot ETH ETFs and sluggish demand. Open Interest (OI) rose by 28.57% to reach $9.6 billion between August and October, which is still considerably lower than the $13 billion seen in June.

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