Ethereum has taken a significant step to improve its network efficiency by increasing its gas limit for the first time since 2021. The adjustment, which allows more transactions per block, was implemented automatically without requiring a hard fork. This move enhances Ethereum’s scalability and strengthens its appeal against competing blockchains.

Ethereum Gas Limit Increased to 32 Million

On Monday, Ethereum validators approved an increase in the network’s gas limit, pushing it close to 32 million gas units, with a maximum expected capacity of 36 million. This marks the first adjustment since the previous rise from 15 million to 30 million in 2021.

Gas refers to the computational power needed to execute operations like transactions and smart contract functions on Ethereum. The gas limit sets the maximum amount of gas that can be used in a single block, determining how many transactions the network can process at a time.

More Transactions, Less Congestion

A higher gas limit means Ethereum can process more transactions within each block, reducing congestion and improving network performance. This is crucial for decentralized finance (DeFi) applications and other complex operations that rely on Ethereum’s blockchain.

During peak times, Ethereum has faced high transaction fees due to network congestion, driving users toward cheaper alternatives like Solana. The gas limit increase is expected to ease these bottlenecks, making Ethereum more attractive to users and developers.

Impact on ETH and Market Sentiment

Despite this improvement, Ether (ETH) has been struggling against Bitcoin (BTC). The ETH/BTC ratio recently dropped to 0.03, the lowest since March 2021, marking a nearly 50% decline over the past year. The shift in investor sentiment comes as Bitcoin has surged ahead of U.S. President-elect Donald Trump’s inauguration, pulling attention away from ETH.

However, the gas limit increase could support ETH’s value by improving the network’s functionality and encouraging more utility-driven demand.

Pectra Upgrade: Doubling Layer-2 Capacity

Ethereum’s upcoming Pectra upgrade is set to further enhance scalability by doubling the capacity of layer-2 networks. This will be achieved by increasing the blob target from three to six, allowing for more efficient data storage. Blobs are large temporary data packets used by layer-2 solutions to enhance transaction throughput without burdening the main Ethereum chain.

With these changes, Ethereum is positioning itself to remain competitive in the evolving blockchain landscape, addressing key pain points and reinforcing its long-term value proposition.