Ethereum Blob Usage Surges with Adoption of Layer 2 Solutions

Ethereum has seen a big increase in the use of “blobs,” a tool for managing data that was introduced earlier this year. This surge indicates that more users are turning to layer-2 scaling solutions for faster and more cost-effective transactions. In fact, the number of binary large objects (blobs) posted to Ethereum has been averaging over 21,000 this month, matching the level of activity seen back in March.

With the Dencun upgrade that rolled out earlier this year, blobs were introduced as a way to attach large data pieces to regular transactions. This storage solution keeps data off-chain, avoiding congestion on the mainnet, unlike call data that is saved permanently. You can think of blobs as a big box full of letters that you pay for as a whole box, versus call data where you pay for each letter individually.

The uptick in blob usage suggests a growing adoption of layer-2 protocols like BASE, Arbitrum, and Optimism. These protocols utilize blobs to bundle transactions together, process them off-chain, and then confirm them on the Ethereum main chain. Matthew Siegel, the head of digital assets research at VanEck, noted that transactions on ETH and its layer 2 solutions continue to hit all-time highs, with a 40% increase compared to the summer. Plus, the average blob count has gone up by approximately 20%, leading to a 30-day high in L2’s Blob Fees.

Blobspace serves as a designated spot within Ethereum’s blocks where layer 2s can temporarily post their data. However, this convenience comes with a cost depending on network conditions. It’s important to understand that blob fees, paid in Ethereum’s native token ether, are burned just like transaction fees, reducing the circulating supply of the cryptocurrency. Surprisingly, the blob base submission fee reached as high as $80 on Monday, the highest since March, and the average number of blobs per Ethereum block went up to 4.3. In the last seven days, blob fees have burned over 166 ETH, equivalent to $560,000, making it the ninth largest such burn, according to ultrasound.money.

According to Artemis, “Blob fees have historically been very low since the implementation of blobs in EIP4844 as they have their own fee market which has largely not seen price discovery. Recently, as on-chain activity has begun to spike, demand for blobspace on the L1 has increased, and the blob fee market has entered price discovery.”

Given this data, it suggests there may be potential for ether to outperform in the future. The second-largest cryptocurrency by market value hit a four-month high of $3,546 on Monday, outshining bitcoin’s 5% decrease, but has since retreated to $3,370, as shown by CoinDesk data.

Overall, the increase in blob usage hints at a growing trend toward layer-2 scaling solutions on Ethereum, bringing faster and more affordable transactions to users.