Tim Robinson, director of cryptocurrency research at BlueYard Capital, presented groundbreaking simulations indicating that the implementation of blobs in Ethereum could be extremely bullish for the long-term price of ETH. In the series posts on X Robinson highlighted how stains could revolutionize Ethereum’s scalability and economic dynamics.

“A lot of people argue about spots, but no one has ever simulated how they respond to demand…until now,” Robinson said. “TL;DR: Blobs are wildly bullish on ETH in the long term.”

Why blobs are “incredibly bullish” on Ethereum price

BLOBs, introduced in Ethereum Improvement Proposal (EIP)-4844, are vast data structures designed to enhance network throughput by efficiently storing and processing data off-chain. This mechanism is crucial for Layer 2 (L2) scaling solutions, enabling them to offer lower transaction fees while maintaining security thanks to the Ethereum consensus.

Robinson’s simulation predicts that Ethereum runs at a rate of 10,000 transactions per second (TPS), burning 6.5% of the total ETH supply per year, and L2 transactions cost an average of $0.06. This scenario includes 16 MB of blobs per block, which is in line with Ethereum co-founder Vitalik Buterin’s medium-term goals outlined in his the latest entry in “The Surge”..

“Yes, it’s Ethereum running at 10k. TPS, burning 6.5% per year, while L2 transactions cost $0.06 on average, at 16MB of blobs per block,” Robinson explained. “You thought L2 were parasites and Vitalik didn’t think this through? “Ah, sweet summer child, you don’t realize how crazy this will all get when the Ethereum ecosystem really kicks into high gear.”

A key finding from Robinson’s research is the rapid escalation of ETH burn as blob usage increases. “It’s interesting how quickly droplets go from being free to burning tons of ETH. It seems like almost everyone doesn’t understand this tipping point. This also makes me think that there could be a better pricing mechanism,” he noted.

Robinson provides a simulation tool illustrating the exponential enhance in ETH burn rate as TPS scales from the current ~180 TPS to 400 TPS. The data shows that the amount of ETH burned increases from approximately 4 ETH per day to 1,832 ETH per day.

It’s compelling how quickly the spots go from tardy to burning tons of ETH. It seems like almost everyone doesn’t understand this tipping point. This also makes me think there could be a better pricing mechanism.

Here’s what the enhance looks like from today’s ~180 TPS to 400 TPS pic.twitter.com/fjuK19NL6y

— Tim Robinson (@timjrobinson) October 29, 2024

The scalability potential is further increased by implementing peer data availability sampling (PeerDAS), which allows blob capacity to scale with the number of validators. “Because the total blob capacity scales across all validators, once PeerDAS is implemented, blobs can be scaled as high as necessary,” Robinson explained. “There are over 10,000 nodes that share the load among themselves. While other ecosystems struggle under the strain, Ethereum will provide the world with cheap, abundant block space while maintaining an extremely deflationary value.”

An intriguing feedback loop identified by Robinson is the inverse relationship between ETH price and burn rate. “Another interesting feedback loop is that the lower the ETH price, the greater the burn! As transaction prices are lower, more transactions are made and burn rate increases,” he noted. “See how different the burn is in the case of ETH at the level of 2,000. dollars compared to ETH at the level of 10 thousand. dollars.”

Another compelling feedback loop is that the lower the ETH price, the greater the burn! As transaction prices are lower, more transactions are made and burn rate increases. See how different the burn is in the case of ETH at the level of 2,000. dollars compared to ETH at the level of 10 thousand. dollars: pic.twitter.com/tbSbC6unwM

— Tim Robinson (@timjrobinson) October 29, 2024

Addressing the issue of ETH increasing in value, Robinson stated: “So how will ETH enhance in value? Being the most useful, insufficient, deflationary asset with over 10,000 teams using Ethereum to develop their products will probably be enough. In the long run, ETH has the best fundamentals in the world; it just takes time for them to act out.

The study generated enthusiasm and discussion within the ETH community. Mat (@materkel) commented on X: “It will be extremely interesting when we reach blob capacity. My guess is that many L2s still need to figure out how to deal with this issue and bill their users accordingly. There will be many shortcomings to fix; we just haven’t had many competitive L2s in this scenario before. Once the dust settles, we will have a corresponding price discovery for both L2 tolls and L1 spots.”

Robinson responded by emphasizing the importance of proactive analysis: “Yes, definitely! I’m trying to take the data with me so we can resolve any issues before we get there. The market is becoming more stable with more spots, but fees can be quite variable in the beginning.”

At the time of publication, the price of ETH was $2,638.

Featured image created with DALL.E, chart from TradingView.com