With the increasing popularity of Layer 2 solutions, the burden on the Ethereum network has grown, raising concerns among experts.
Layer 2 Solutions and Rising Demand
Layer 2 solutions are protocols built on top of Layer 1 networks. They focus on enhancing scalability and reducing transaction costs through off-chain operations. Since late last year, more users have adopted these protocols for faster and more cost-effective transactions.
Blob Limits and Fees
Blobs are similar to standard transactions but carry extra processing data. Unlike traditional transactions, those containing blobs do not permanently occupy space on the main network and are only accessible for 18 days. Ethereum has a limit of six blobs per block with a target of three, and once this target is met, a base fee is charged to manage demand from Layer 2.
Since November, the demand for blobs has consistently exceeded the target of three. This situation has led to competition among many Layer 2s for the block target and rising base fees. Ethereum's Pectra upgrade is set to increase the limit to nine blobs per block in March 2025.
High base fees are causing increased costs for decentralized exchanges (DEXs) and users. Santhosh explained that DEXs are seeing higher transaction costs, perpetual contracts are facing fee surges, and users are paying more for basic transactions. Base fees at Polynomial.fi have increased by 300% in recent months.
Consequences and Future Updates
The Pectra upgrade offers a temporary solution by raising the block blob limit. However, Santhosh emphasizes that merely doubling this capacity is not a long-term solution, stating, “It’s not just months, or years.” The increasing demand for Layer 2 solutions is straining Ethereum's main network capacity, leading to higher user costs due to elevated base fees and limited blob capacity.
The demand for Layer 2 highlights the need for further technical improvements to maintain Ethereum network resilience.
