Podcast Summary
Ethereum's Upcoming Major Upgrade: Blob Space: Ethereum's Blob Space upgrade introduces new markets for Ethereum: Blockspace and Blobspace, impacting Ether's economics and Layer 2 scalability.
Ethereum is on the verge of a major upgrade called Blob Space, which will introduce a new product for Ethereum to sell and significantly impact its economics. This upgrade, EIP 4844, is also known as proto dank sharding among geeks, and it will create two distinct markets within Ethereum: Blockspace and Blobspace. These markets will be contained within each Ethereum block. The implications of this for Ether, the marketplaces around these new markets, and Layer 2 scalability are significant and far-reaching. This episode, featuring Ethereum researcher Domathy, covers the basics of Blob Space, its history, and the economics behind it, providing listeners with a comprehensive understanding of this near-term, relevant, and exciting development in the Ethereum ecosystem.
New resource 'blob space' makes rollups cheaper and more scalable on Ethereum: Ethereum's EIP 4844 upgrade introduces blob space, a new resource for layer twos, allowing rollups to commit data off-chain and prove it on-chain without using Ethereum's traditional block space, enhancing scalability and reducing costs.
Ethereum's upcoming EIP 4844 upgrade introduces a new resource called blob space, which will make rollups cheaper and more scalable. Blob space is essentially block space for layer twos, allowing them to commit data off-chain and prove it on-chain without the need for Ethereum's traditional block space. This innovation comes after Ethereum's earlier attempts at scaling through sharding didn't yield significant results. Researcher Dom, from the Ethereum Foundation, explains that blob space will be as important a resource as block space and will likely reshape Ethereum's economic and structural landscape once it's implemented. Dom also clarified that currently, layer twos are using Ethereum's block space instead of blob space, and EIP 4844 will partition off blob space specifically for rollups to consume. Overall, the introduction of blob space is a significant step forward in Ethereum's scalability journey.
Ethereum's Scalability Solution: From Execution Sharding to Roll Ups: Ethereum initially aimed for execution sharding, but faced challenges. Community shifted focus to roll ups for a more feasible sharding solution, allowing Ethereum to focus on fewer responsibilities while offloading the rest to roll ups.
The early research goal for Ethereum's scalability solution was to achieve sharding, which involves splitting the blockchain into smaller pieces for increased parallel processing. However, execution charting, an initial approach to sharding, proved to be challenging due to safety concerns. The community then shifted focus to roll ups as a more feasible solution for implementing sharding. Execution sharding, the original plan for sharding, aimed to have Ethereum's layer 1 protocol determine and manage the shards. However, the implementation of execution sharding through roll ups is more indirect, allowing Ethereum to focus on fewer responsibilities while offloading the rest to roll ups. This change, while different from the original plan, has proven to be a successful approach to achieving sharding and improving Ethereum's scalability. Despite the initial challenges, the Ethereum community remained committed to finding a solution, understanding that sharding was the answer, even if the implementation varied.
Ethereum's evolution through roll ups: Separating layers and fostering competition: Ethereum's roll ups bring competition and innovation by separating consensus, data availability, and execution layers, offering different trade-offs, inheriting Ethereum's security, and eliminating intermediaries.
Ethereum's move towards roll ups brings competition and innovation to the blockchain by separating the consensus, data availability, and execution layers. Roll ups, which are Ethereum-compatible Layer 2 solutions, offer different trade-offs, such as speed or security, allowing users to choose the best fit for their needs. This new paradigm ensures that roll ups inherit the security of Ethereum's mainnet, giving users the confidence to trust their assets and transactions. Roll ups post their data on Ethereum, eliminating the need for trust in intermediaries and ensuring that users can verify the chain's state transitions and execute transactions independently. This separation of layers and competition among roll ups is a significant step forward in Ethereum's evolution, offering improved scalability and a more decentralized ecosystem.
Exploring Roll Ups as a More Scalable Alternative to Sharding Layer 1: Ethereum's community is focusing on roll ups as a more scalable solution due to their ability to make sacrifices that Layer 1 can't and the bottom-up, free market driven approach.
Ethereum's scalability limitations have led the community to explore roll up solutions as a more scalable alternative to sharding Layer 1. Vitalik Buterin, Ethereum's co-founder, believes that even if Layer 1 execution is sharded, roll ups will still be more scalable due to their ability to make sacrifices that Layer 1 can't. This is because Layer 1 enforces constraints on Layer 2 through bridge contracts, making it difficult to achieve the same level of scale. Furthermore, the roll up centric approach allows for more pluralism and optionality, as it is more bottom-up and free market driven compared to Ethereum's original top-down central planning. Ultimately, the community's focus on roll ups is a pragmatic response to the need for greater scalability, as roll ups are expected to be much faster than sharded Layer 1. This shift towards roll ups also reflects a broader trend towards decentralized and bottom-up innovation in the blockchain space.
Ethereum's roll up-centric roadmap: A genius move for scaling: Ethereum's shift towards roll ups has accelerated innovation, proven effective for scaling, but faces challenges with expensive data availability layer
Ethereum's shift towards a roll up-centric roadmap, which allows for parallel experiments in the roll up world, was a genius move that has accelerated innovation and development. Although it was initially seen as a pivot or even a failure, it has proven to be an effective solution for scaling Ethereum and making it accessible to everyone. However, the current state still faces challenges as the cost of using Ethereum's data availability layer, which is required for roll ups, can be expensive and limiting due to resource coupling issues. Despite these challenges, the potential benefits of this approach far outweigh the costs, and Ethereum continues to be a leader in the blockchain space.
Ethereum's Rollups Face Resource Coupling Issues: Ethereum's Eth2 rollups face resource coupling issues, leading to competition for block space and the introduction of a new resource called blobspace, enabling more efficient scaling for rollups.
Ethereum's current state has three main issues when it comes to rollups: resource coupling, the inappropriate coupling of data and execution resources, and the introduction of a new concept called blobs and blob space. Rollups are competing with NFT bidders for the same block space on the main chain, leading to economic competition and increased prices. The resource coupling problem arises because Ethereum historically coupled everything into a single unit of gas, but data and execution are different resources that shouldn't be linked. Rollups primarily use data, while NFT bidders use execution for sending money and settling trades. Furthermore, Ethereum is now in the blob business, as the introduction of EIP 4844 could lead to the sale of not only blockspace but also blobspace, a product tailored for rollups. Blobs are a new resource that allows rollups to park their fraud proof data in a much more efficient and cheaper way than posting it into Ethereum's block space. The block references the blob, but the blob isn't contained within the block; instead, it's a sidecar alongside the block. This new resource, blobspace, enables rollups to scale more efficiently by offloading expensive computations from the consensus layer to the rollup layer. The key insight here is that blockchains now sell both blocks and blobs as resources to the market. This change could significantly impact the Ethereum ecosystem and the broader blockchain industry.
Decoupling Data and Transactions in Ethereum Rollups: Rollups can save resources and scale Ethereum network by using BlobSpace, a separate container for data, instead of traditional blockspace. BlobSpace is expected to be cost-effective and abundant, making it suitable for NFT projects.
BlobSpace is a more cost-effective and abundant solution for rollups compared to traditional blockspace. Rollups, which batch transactions off-chain and submit proofs to the main Ethereum chain, primarily need data. BlobSpace, a new concept introduced by Ethereum Improvement Proposal 4844, is a separate container for data that layer 1 (the main Ethereum chain) does not care about or process. This decoupling allows rollups to save resources and scale the Ethereum network. Validators, on the other hand, are responsible for verifying and securing the Ethereum network. They will continue to validate transactions on the main chain but will also need to support and verify rollup blobs. This change does not limit users from putting any data in layer 1 blobs; however, it may be more expensive. BlobSpace is expected to be particularly useful for NFT projects due to its low cost and abundance. Despite the potential for misuse, Ethereum cannot be top-down about who gets to use what data from a credible neutrality standpoint. The properties of BlobSpace are most conducive to rollups, but it remains a permissionless system.
Ethereum's Blob Space: 18-Day Data Availability: Ethereum's Blob space allows for data to be stored for 18 days, ensuring data availability and scalability, while reducing the need for nodes to store everything forever.
The introduction of Blob space in Ethereum's data availability system does not require validators or stakers to store the data forever. Instead, the data will expire after approximately 18 days, after which it becomes proof that it was available during that time. This expiry is a solution to the problem of storing everything forever by every node, which doesn't scale. The 18-day expiry ensures that data was available when it was published and downloadable by everyone, while also allowing the data to be stored in more long-term solutions like Celestia or roll up operators' hard drives. This commitment to data availability for 18 days allows for a fully trustless chain of data that goes back to Genesis, enabling lightweight nodes to verify everything in a scalable way. The blob data, which is not part of the state and doesn't need to be read and written to frequently, can be stored on cheap hard drives. The future may bring software applications that allow users to follow their addresses on selected layer twos and download and store the necessary data for cheap.
Ethereum's Layer 2 solutions push data storage to the free market: Ethereum's Layer 2 solutions, like roll ups, allow users to choose data based on interests, increasing data availability and reducing gas fees, while requiring more storage from validators.
Ethereum's Layer 2 solutions, like roll ups, are pushing data storage out to the free market, allowing users to choose which data they want to download and store based on their interests. Ethereum itself focuses on data availability rather than data storage. This distinction is significant as it allows for longer time periods for data availability, ensuring that anyone who needs the data can download it. However, this comes with an increase in storage requirements for validators, estimated to be around 50 gigabytes for current Ethereum sizes. Mantle, a new Ethereum Layer 2 solution, uses this data availability solution to reduce gas fees and provide a more stable foundation for its applications. The Mantle network, with its large DAO-owned treasury, is also offering grants to promising projects to expand and decentralize its ecosystem. Overall, Ethereum's Layer 2 solutions are pushing for a more decentralized and efficient data storage system, allowing users to choose what they store and reducing the burden on the Ethereum network.
Decentralized Finance's Layer 2 Solutions: Uniswap and Celo: Uniswap's mobile wallet enables easy trading on the go and access to Ethereum's layer 2 solutions, while Celo's new proposal brings decentralized sequencing, off-chain data availability, and 1 block finality to Ethereum, enhancing real-world use cases and efficiency for developers and users alike.
The decentralized finance (DeFi) landscape is evolving rapidly, with significant developments happening in layer 2 solutions like Uniswap and Celo. Uniswap, the world's largest decentralized exchange, has released its mobile wallet, allowing users to easily trade tokens on the go and access various blockchains, including Ethereum's layer 2 solutions. Celo, a mobile-first, carbon-negative blockchain, is also making strides with its new layer 2 proposal, bringing huge advantages like decentralized sequencing, off-chain data availability, and 1 block finality to Ethereum. These developments mean more real-world use cases for Ethereum without compromising security. For developers, the migration to layer 2 solutions means more block space, allowing for more transactions per second and less need for gas optimization tricks. For users, the technical complexities of blockchain should be abstracted away, making the overall blockchain ecosystem more trustless and permissionless. In essence, layer 2 solutions like Uniswap and Celo are turning cheaper, subsidized "blob space" into valuable "block space," making development and usage on these platforms more efficient and accessible.
Layer 2 solutions like rollups process complex transactions off-chain and offer scalability and cost savings: Layer 2 solutions like rollups enable more intricate transactions at a lower cost by processing data off-chain and only transmitting the output to layer 1 for verification using polynomial math and sharding
Layer 2 solutions like rollups offer significant scalability and cost savings by processing complex transactions off-chain and only transmitting the output to layer 1 for verification. This allows for more intricate transactions to be executed at a lower cost than on layer 1. The process involves breaking down large datasets into smaller elements called field elements, which are then interpolated into a high-degree polynomial equation. This polynomial magic is the foundation of sharding, enabling more data to be contained in a smaller amount of data and allowing nodes to verify data availability without downloading it all. Ethereum's current data availability layer, which relies on block space and call data, is not scalable due to the need for every node to download everything. With full Danksharding, the data availability sampling aspect will make this layer more explicit, ensuring that even a supermajority of validators cannot deceive others into believing unavailable data is present. Nodes will only need to sample a tiny amount of data to confirm its availability with a one in a trillion probability. EIP 4844, also known as proto Danksharding, sets the stage for full Danksharding by introducing the polynomial math concepts.
Exploring polynomial math for Ethereum scalability: Ethereum researchers use polynomial math to enhance scalability via proto and full danksharding, employing data availability sampling for efficient verification.
Ethereum researchers are exploring new mathematical concepts, specifically polynomial math, to enhance scalability through proto danksharding and full danksharding. This isn't a completely new branch of math but rather a clever application of existing concepts like erasure coding and data reconstruction. Data availability sampling, a key component of this approach, allows for the verification of block availability without having to download the entire block. Although it's hard to provide specific numbers, the potential scalability increases are significant. Ethereum's approach balances hardline trustlessness with pragmatism, as evidenced by the acceptance of a 1 trillionth probability of a fraudulent block in exchange for massive scalability gains.
EIP 4844: Introducing a Two-Dimensional Fee Market: EIP 4844 introduces a new fee market, separating execution and data fees, leading to potential scalability improvements and cost savings for layer 2 solutions.
The implementation of Ethereum Improvement Proposal (EIP) 4844 introduces a two-dimensional fee market, where execution and data (blobs) will be priced separately based on individual demand. This is a significant shift from the current one-dimensional fee market where only gas fees apply. The discussion also highlighted that this change could lead to substantial scalability improvements, potentially allowing layer 2 solutions to operate at a much higher scaling factor than the current 5x mainnet. The economics of this new fee market are still speculative, but it's predicted that blobs will initially be underutilized and practically free, with layer 2 transactions being subsidized. However, as more users join, blob space will become scarcer and its price will increase. The overall impact of EIP 4844 is expected to make layer 2 solutions more cost-effective and scalable, ultimately benefiting the Ethereum network as a whole. Additionally, the mathematics and statistics behind the implementation are impressive, enabling cool features like verifying the entire blockchain by a caveman after a long hibernation.
Decoupling Gas and Blob Space Markets: EIP-1559 separates gas and blob space pricing, initially making blob space free and increasing its cost when demand exceeds target, to manage congestion and encourage layer 2 adoption, potentially decreasing ETH burn initially but increasing it in the long run.
Ethereum's EIP-1559 introduces a decoupled market for gas and blob space. While gas prices are used to manage congestion in the blockchain, blob space, which is used for rollups' data storage, operates under a similar mechanism but with different pricing dynamics. Initially, blobs will be practically free when there's no congestion, but the price increases when demand for blob space exceeds the target. The ultimate goal is to manage congestion and encourage the adoption of layer 2 solutions. This decoupling of markets creates a balance between block space and blob space, as the cheaper cost of layer 2 solutions is likely to pull transaction demand away from layer 1 and rebalance the demand between the two resources. In aggregate, the total ETH burn is expected to decrease initially, but it may eventually increase as layer 2 solutions gain more adoption and users.
Introducing BlobSpace in Ethereum's layer 2 solutions reduces transaction fees: BlobSpace in Ethereum's layer 2 solutions leads to lower transaction fees, increasing accessibility and potential long-term offset of ETH burn
The introduction of BlobSpace in Ethereum's layer 2 solutions will lead to a significant reduction in transaction fees, making the network more accessible to a wider range of users and use cases. This reduction in fees on layer 2 will initially result in less ETH being burned, but the increased adoption and scalability could offset this in the long run. The competition among different layer 2 solutions for blob space could lead to a complex economic model, with new applications consuming ETH as collateral and driving value accretion. However, if blob space becomes too expensive for some layer 2 solutions, they may lose profitability and struggle to compete. Ultimately, the impact of BlobSpace on Ethereum's demand for block space and the price of ETH is uncertain and will depend on various factors, including the adoption of layer 2 solutions and the economic models of the applications built on them.
Efficiently utilizing Ethereum's layer 1 blob space in rollups: Rollups that effectively utilize Ethereum's layer 1 blob space offer cheaper transactions and attract more demand, leading to network effects and growth of the rollup ecosystem, with Ethereum's protocol indirectly subsidizing rollups through batching and periodic commits.
In the Ethereum ecosystem, rollups are competing to efficiently utilize Blob space from Ethereum's layer 1 to create valuable layer 2 blockspace. Rollups that effectively utilize Blob space will provide cheaper transactions and attract more demand, leading to network effects similar to Ethereum's layer 1. However, the frequency at which rollups commit their state to Ethereum's layer 1 blob space is a new variable to consider in layer 2 economics. This decision impacts the balance of security versus efficiency for users on the respective layer 2. Additionally, Ethereum's protocol indirectly subsidizes rollups by allowing them to batch transactions and only commit blobs periodically, making their operations more efficient. This subsidy encourages the growth of the rollup ecosystem, allowing for more scalability and accessibility for Ethereum users.
Ethereum's EIP 4844 makes roll ups cheaper by decoupling data from execution: Ethereum's EIP 4844 separates data from execution, leading to more efficient usage of resources and cheaper roll ups. The free market will determine which roll up is most efficient, potentially leading to them being enshrined onto layer 1 in the future.
Ethereum's latest move to make roll ups cheaper through the Ethereum Improvement Proposal (EIP) 4844 is a deliberate decision aimed at making blockchain transactions fractions of a penny. This change decouples data from execution into two different spaces in a block, leading to more efficient usage of resources and allowing roll ups to be cheaper. However, it's important to note that the protocol is not picking winners and losers; it's simply separating data from execution and letting the free market build on top of this permissionless protocol. The roll up that uses BlobSpace most efficiently will offer the cheapest fees and attract the most users. In the long run, roll ups may even be enshrined onto layer 1, effectively scaling up execution in a much better way than initially planned. This is a significant development in Ethereum's roadmap and a fascinating return to execution charting in the distant future. The market will innovate and find the best designs, and Ethereum will simply entrain the most secure and efficient solutions into the layer 1 chain. This approach allows Ethereum to avoid upgrades and research at the layer 1 level, making the network more scalable and efficient.
Ethereum's dynamic roadmap: Addition by subtraction: Ethereum's approach to development combines top-down rules and bottom-up markets, allowing for adaptation and responsiveness to market demands. Upcoming implementations like EIP-4844 and eventual sharding will significantly decrease costs and increase usage, with rollups acting as crucial stepping stones.
Ethereum's harmony between top-down rules and bottom-up markets, as exemplified by the upcoming implementation of EIP-4844 and eventual sharding, results in a dynamic and evolving roadmap. This approach, which Vitalik refers to as "addition by subtraction," allows the Ethereum community to delegate and adapt, ensuring the protocol remains responsive to market demands. The implementation of EIP-4844, expected around November 2023, will significantly decrease the cost of blob space and layer 2 data availability, leading to increased usage and potential congestion. Full sharding, with its promised increase in blob space, can alleviate this issue, but further developments, such as improvements in networking and sampling techniques, are necessary before it can be fully realized. The rollout of EIP-4844 acts as a crucial stepping stone for rollups, as they can utilize the available blob space without requiring an upgrade once full sharding is implemented. This dynamic and adaptive approach to Ethereum's development ensures the protocol remains at the forefront of the ever-evolving crypto landscape. Keep in mind that while the potential benefits of Ethereum's ongoing developments are exciting, crypto is inherently risky, and investors should be prepared for potential losses. Stay tuned for more updates on Ethereum's journey towards blob space and beyond.
