Ethereum Dencun Upgrade: A Game-Changing Update for Reduced Fees
Ethereum (ETH) users are eagerly awaiting the highly anticipated Dencun upgrade, which is set to bring about the most significant code change to the blockchain in over a year. This upgrade has the potential to impact Ethereum fees and introduce a new era of reduced fees for Ethereum Layer 2 (L2) rollups.
The Dencun upgrade, a combination of the project names Deneb and Cancun, includes two simultaneous upgrades on Ethereumโs consensus and execution layers. It aims to enhance Ethereumโs capacity to handle data from L2 networks and improve data availability layers within the Ethereum ecosystem.
What is Dencun?
The Dencun upgrade is Ethereumโs most substantial update since the Shapella upgrade in April 2023. It encompasses several code changes, with the most significant being โproto-danksharding.โ This introduces a new method called โblobsโ for storing transaction data on Ethereum.
L2 networks such as Arbitrum, Optimism, and Polygon will benefit greatly from the Dencun upgrade. These networks help scale Ethereum by aggregating user transactions and submitting them to Ethereum for settlement in large batches. They have become the primary platforms for transacting on Ethereum, accumulating billions of dollars in deposits and consistently demonstrating higher transaction volumes than the main Ethereum chain.
Following the Dencun upgrade, L2 networks will be able to post data to Ethereum within the dedicated blobspace, eliminating the need to squeeze data into conventional transactions at a higher cost. This is expected to enable L2 networks to settle more data more efficiently, subsequently reducing fees for end-users.
EIP-4844 to Benefit Data Availability Layers
EIP-4844, also known as proto-danksharding, benefits a new group of blockchains within the Ethereum ecosystem called data availability (DA) layers. These layers facilitate the storage of large amounts of data, which L2 networks often utilize for storing transaction data. Proto-danksharding has the potential to lower the costs associated with downloading DA data.
After the Dencun upgrade, Ethereum developers will shift their focus to the next upgrade, currently named Electra + Prague (Petra). This upgrade aims to enhance node storage capabilities for large amounts of data.
Dencun Upgrade to Reduce Ethereum Fees
The Dencun upgrade is expected to significantly reduce Ethereum fees, especially on L2 networks. According to data from L2fees, the average cost of sending ETH on Arbitrum is $0.24, while token swaps cost $0.67. On Optimism and Polygon, fees for transactions and token swaps are even higher.
However, once EIP-4844 is implemented as part of the Dencun upgrade, these fees are anticipated to decrease significantly. For example, token swaps on Optimism could cost around $0.03 after the upgrade, representing a more than 96% drop in fees. Similar reductions in fees are predicted for other L2 networks as well.
The Starknet Foundation has announced that its users will experience the highest savings among all layer-2 networks after the Dencun upgrade. They allocate a larger proportion of fees to data availability (DA) layers compared to other networks and plan to introduce further innovations to achieve additional savings.
Ethereum Price Prediction
As the Dencun upgrade approaches, analysts are optimistic about Ethereumโs price action and potential. Technical and on-chain analyst Ali believes that Ethereumโs path to $5,000 โlooks increasingly clear as resistance thins.โ He points to a supply zone at $4,522-$4,646 where 600,000 addresses hold 1.63 million ETH.
At the time of writing, the Ethereum price stands at over $4,000. Although it has been relatively flat over the past day, Ethereum has seen significant gains of more than 51% in the past month and 156% in the past year.
Hot Take: Dencun Upgrade Set to Revolutionize Ethereum
The Dencun upgrade is a game-changer for Ethereum users and developers alike. With its focus on reducing fees and improving scalability through L2 networks and data availability layers, this upgrade has the potential to revolutionize the Ethereum ecosystem. As users eagerly await its implementation, the future of Ethereum looks brighter than ever.
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