The Next Ethereum Update to Bring Significant Reduction in Fees on Rollups
The upcoming Ethereum update, known as Dencun, is expected to bring a substantial decrease in fees for rollup transactions. Rollups are layer-2 solutions for Ethereum, and they will benefit greatly from the introduction of Dencun’s proto-danksharding.
The Dencun Update of Ethereum and the Reduction of Fees
Dencun is an important update for Ethereum as it introduces proto-danksharding. This new feature allows for a new type of transaction that accepts compressed data blobs instead of calldata, resulting in lower fees. The name Dencun combines the names Deneb and Cancun, representing the consensus level and execution level updates of Ethereum.
The Reduction of Fees
With the introduction of proto-danksharding, Dencun will enable a reduction in fees for rollup transactions. Prominent rollups like Arbitrum and Optimism will benefit the most from this fee reduction. Transactions on these rollups can become lighter and cheaper since fees depend on the size of individual transactions. The use of blobs instead of calldata could potentially lead to cost reductions of around 80% to 90%.
The Cost of Fees on Ethereum Before the Dencun Update
Currently, the average cost of a single transaction on the Ethereum layer-1 ranges from $2 to over $9. However, on Arbitrum and Optimism, these costs are significantly lower, with Arbitrum being approximately one hundred times cheaper and Optimism being even ten thousand times cheaper. These costs vary depending on network congestion.
The Problem Solved
A recent test of the Dencun update on the Goerli testnet encountered a problem that caused a chain split. However, the issue has been identified and fixed. Further tests will be conducted on the Sepolia and Holesky testnets before Dencun can be implemented on the Ethereum mainnet.
I Rollup
Rollups are an effective solution for improving Ethereum’s scalability. They operate on their own layer-2 and do not require transactions to be recorded on the layer-1 Ethereum blockchain. This results in faster and cheaper transactions. Rollups are similar to Bitcoin’s Lightning Network in concept but differ in technical implementation. Layer-1s are slow and expensive, while layer-2s offer higher performance without compromising security.
Hot Take: Dencun Update to Reduce Fees and Improve Scalability on Ethereum
The upcoming Dencun update for Ethereum brings promising advancements in reducing transaction fees and enhancing scalability. With the introduction of proto-danksharding, rollup transactions on platforms like Arbitrum and Optimism are expected to see significant cost reductions. This update allows for the use of compressed data blobs instead of calldata, resulting in more efficient and cost-effective transactions.
While Ethereum’s layer-1 transactions currently incur relatively high fees, rollups provide a solution by operating on their own layer-2. This approach improves transaction speed and affordability by bypassing the layer-1 blockchain. The successful testing and implementation of Dencun will pave the way for a more scalable Ethereum network, making microtransactions more accessible and sustainable.
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