The Ethereum price has been doing reasonably well over the past few months, raking in more gains and surpassing the $2,500 level.
As of January 12th, ETH is trading at $2,614, leaving many investors convinced that the marketplace is beginning to recover. 2024 is expected to be a very good year for cryptocurrencies, with more considerable gains than losses.
There will still be plenty of changes in the meantime, though, as all crypto environments are constantly evolving and shifting.
Gas limits
Ethereum gas is the amount users pay to have their transactions processed. The use of smart contracts attracts a fee as well, which is called gwei.
This is short for gigagwei, and one is equal to the billionth part of an Ether coin. The gas fees can only be paid in the native token, so no other crypto is acceptable.
Surges in demand cause network congestion, which in turn makes gas fees steeper. This can cause delays and even momentary blockages.
Some investors are also less likely to invest, as they cannot comfortably afford the fees.
This means that engagement rates are lower, and the markets stagnate. During peak hours, the prices can skyrocket suddenly because the users compete to process transactions as quickly as they can.
High gas prices have been a problem for the Ethereum environment for a while now, which is why the announcement that they might become even steeper came as a surprise.
On January 11th, Vitalik Buterin, one of the Ethereum co-founders, advocated for a 33% gas limit increase, believed to be a “modest” price spike.
The reason is that the increase could potentially improve the network throughput.
This would mean going to 40 million from the current 30 million, allowing more transactions in the same block.
Theoretically, this would indeed drive network capacity up. Investors and analysts have already started debating whether the possible damaging effects and risks wouldn’t outweigh the benefits.
Concerns
The cryptocurrency space is very complex, and many interconnected factors determine the proceedings and evolution of coins and their blockchains.
Therefore, anytime there’s an announcement that something is set to change, users begin discussing their predictions.
When it comes to the hypothetical increase of the gas limits, the main concern is the increase of the blockchain state.
This is the status of all the system data, including account balances, storage, and codes.
At the moment, the total space the blockchain requires for the state to operate adequately is 267 GB. But if the gas fees increase, the size will grow much more rapidly, potentially spinning out of control and causing trouble.
According to estimations, the full history data size of the ETH blockchain is around 900 gigabytes. Others argue that storage space is cheap, so this shouldn’t be an issue.
Moreover, anyone would be able to store it, so accessibility is also not a core issue. The problem is that modifying the data and carrying out tasks would become increasingly slower.
There are no specific and definitive solutions for that issue yet.
If the environment evolves very fast, it might have to be created to keep it working.
The higher limits could also impact synchronization and make the blockchain problematic for some users to navigate.
The gas limits are also expected to increase bandwidth.
Future upgrades
The Ethereum blockchain is known for its ability to drive innovation and has been at the forefront of tech development in the decentralized space.
Unlike Bitcoin, which is known primarily as a cryptocurrency, Ethereum expanded its use cases and pioneered both decentralized finance and applications.
It is difficult to continue to innovate in an area that is already fast-paced and constantly changing.
One of the chief considerations of all upgrades is ensuring that the blocks aren’t too large, which would naturally impact performance.
One potential solution is EIP-4444, also known as proto-dank sharding. This upgrade proposes implementing new transaction formats and procedures but avoids sharding.
Indexers will be able to acquire the necessary data for querying much faster, as the upgrade is set to tackle chain history expiration.
EIP-4844 is another upgrade and a very tangible step toward Ethereum’s goal of scaling its network while remaining completely decentralized.
It would increase rollup data availability through “blobs” that can curb growth trends in the long term. It will scale Ethereum and make the network more accessible.
The size and number of blobs in every block will be limited so that the computational and storage requirements don’t increase beyond measure.
The limitations can be expanded even further in future upgrades to keep the network scalable.
Blob data would also be less expensive than regular ETH data because blobs aren’t available from the execution layer.
Only a reference is accessible, and the blob can be stored only on the consensus layer, and even then only for a predetermined amount of time.
The general time frame is somewhere around eighteen days. These updates are all set to preserve decentralization.
In the future, the blockchain will develop more complex scalability methods.
In this sense, a gas fee increase could benefit from these additions. They could act to keep the Ethereum ecosystem easy to navigate and ensure that all the adverse effects are kept at bay or even completely eliminated.
The bottom line
Blockchains continue to grow and evolve, and new solutions are necessary to guarantee they remain operational.
Ethereum has long been a leader in innovation in the crypto and blockchain ecosystem, so it is no surprise that it is already announcing new changes right at the beginning of the year.
The Bitcoin ETFs were finally approved on January 10th, and investors are already anticipating the approval of the Ethereum projects soon.
August seems like the most likely date, but May has also been proposed as a date when an announcement is expected to come.
All these shifts will also impact the prices, so investors need to remain attentive and keep an open mind to see all the opportunities they have.