Discover more from Base Layer
EIP-4844 is the next big catalyst
Optimistic rollups are like a trust system for finalizing transactions. Instead of double-checking every transaction right away, they give it the benefit of the doubt and assume it's legit. If someone thinks a transaction's fishy, they have 7 days to challenge it using some fancy crypto-proof. If no one challenges it in that time, it's locked in and can't be changed.
Making blocks in this system is the job of the sequencer. This sequencer orders transactions, processes them, and sends the data to Ethereum's main system. Right now, there's only one big player (like a company) in charge of this, making the system pretty centralized. But that was just for the starting phase. Soon, they plan to open it up so anyone can get involved.
Right now, Optimistic rollups make some stuff cheaper on the second layer. But posting data to the main Ethereum layer? Still pricey. To post data to Ethereum's main layer, they use a technique called calldata. Both Arbitrum and Optimism are trying to squish this data to make it smaller and cheaper using fancy tech like Zlib and brotli. Optimism's got it so tight that they're almost at the cheapest they can possibly be, until a new change called EIP-4844 comes in.
EIP-4844 is a plan to make data posting cheaper on Ethereum. Instead of the old way, they want to introduce a 'blob' system where data is stored temporarily for around 14-30 days. For Optimistic rollups, data only needs to stick around for 7 days for checks and balances. After that, they can toss it out.
The first idea for EIP-4844 was to just make the old method (calldata) 10x cheaper. But that would've made the data blocks bigger and harder for computers to handle. And, there was no way to get rid of old data. So, they thought of a smarter way: store this 'blob' data in a special place on Ethereum. After a set time, this data can be deleted, which makes everything more manageable.
EIP-4844 radically changes how much profit the sequencer makes. Think of sequencer profit like this:
sequencer profit = Money from transaction fees on layer-2 - Costs for posting data to layer-1
Right now, the cost for posting data on layer-1 (because of the calldata) eats into the sequencer's profits big time. Currently, Optimism and Arbitrum sequencers keep about 20-25% of what they make. But after EIP-4844 kicks in, they'll keep a whopping 92% because the costs on layer-1 drop a ton.
EIP-4844 is expected to be ready by either Q4 2023 or early 2024.
I personally believe another way to get exposure to EIP-4844 is through COIN 0.00%↑ (Coinbase). Because they launched Base and they run the sequencer, the higher profits they’ll end up capturing from this upgrade would yield positively for the company.
There’s a lot more coming up for the ETH & L2 ecosystem that we need to dig into. We’ll catch you in the next post!