Ethereum users are eagerly anticipating the Dencun upgrade, which is expected to bring significant changes to the Ethereum blockchain and potentially impact transaction fees. The upgrade, named after the projects Deneb and Cancun, consists of two simultaneous upgrades on Ethereum’s consensus and execution layers.

One of the main objectives of the Dencun upgrade, also referred to as a “hard fork,” is to reduce fees for Ethereum Layer 2 (L2) rollups. This is expected to improve scalability and make transactions more cost-effective on the Ethereum network.

Additionally, the upgrade will activate a new Ethereum Improvement Proposal (EIP) called “proto-danksharding” or EIP-4844. This proposal aims to enhance Ethereum’s ability to handle data from Layer 2 networks, further improving scalability and network performance.

While the Dencun upgrade has been in development for several years, its implementation was delayed from the original target of late 2023 due to engineering concerns. However, extensive testing on multiple test networks (testnets) has been conducted, and most of these tests have been successful.

With the Dencun upgrade, Ethereum users are hopeful for improved scalability, reduced fees, and enhanced overall performance on the network.

What is Dencun?

The Dencun upgrade is considered the most significant update to Ethereum since the Shapella upgrade in April 2023, which introduced the ability to withdraw staked ether (ETH). Dencun encompasses several code changes, with the prominent feature being “proto-danksharding,” which introduces a new method called “blobs” for storing transaction data on Ethereum.

Layer-2 networks like Arbitrum, Optimism, and Polygon are expected to benefit greatly from the Dencun upgrade. These networks play a crucial role in scaling Ethereum by aggregating user transactions and submitting them to the Ethereum main chain for settlement in large batches. Over the past year, these Layer-2 networks have become the primary platforms for transacting on Ethereum, accumulating substantial deposits and consistently handling higher transaction volumes than the main Ethereum chain.

With the implementation of Dencun, Layer-2 networks will have the ability to post data to Ethereum within a dedicated “blobspace,” eliminating the need to fit data into conventional transactions at a higher cost. This enhancement is expected to improve the efficiency of settling data on Layer-2 networks, ultimately leading to reduced fees for end-users.

Overall, the Dencun upgrade aims to improve scalability, reduce fees, and enhance the performance of Ethereum, particularly for Layer-2 networks that have become integral to the Ethereum ecosystem.

EIP-4844: Enhancing Data Availability Layers for Improved Benefits

EIP-4844, also known as proto-danksharding, not only benefits Layer-2 networks but also a new group of blockchains known as data availability (DA) layers within the Ethereum ecosystem. DA layers such as Celestia, EigenDA, and Avail specialize in storing large amounts of data that are often utilized by Layer-2 networks for storing transaction data.

Proto-danksharding has the potential to reduce the costs associated with downloading data from these DA layers, making data storage more efficient and cost-effective.

Once the Dencun upgrade is completed, Ethereum developers will shift their focus to the next upgrade, currently referred to as Electra + Prague (Petra). While the specific components of this upgrade have not been finalized, one strong contender is an upgrade called “Verkle Trees.” The purpose of Verkle Trees is to enhance node storage capabilities, particularly for handling large amounts of data.

These ongoing upgrades and developments in the Ethereum ecosystem demonstrate the continuous efforts to improve scalability, reduce costs, and enhance the overall functionality of the network.

Dencun Upgrade: Promising Reduction in Ethereum Fees

According to data from L2fees, the current average cost of sending ETH on Arbitrum is $0.24, with token swaps costing $0.67. On Optimism, the fees are $0.47 and $0.92, respectively, while Polygon charges $0.78 for transactions and $2.85 for token swaps.

However, these figures are expected to decrease significantly following the Dencun upgrade, particularly with the implementation of EIP-4844. According to the Superchain Savings Estimator, token swaps on Optimism are predicted to cost around $0.03, representing a reduction of over 96%. Similarly, gas fees for token swaps on Base L2 are estimated to decrease from approximately $0.58 to $0.01 after EIP-4844.

The Starknet Foundation, which supports the Starknet chain, has announced that its users will experience the highest savings among all Layer-2 networks. They attribute this to a larger proportion of fees being allocated to data availability (DA) layers compared to other networks. The foundation also expressed their commitment to further innovations that will lead to additional savings. They plan to charge fees at future rates to bridge the gap until these improvements are fully implemented.

Overall, the Dencun upgrade, along with the implementation of EIP-4844, is expected to significantly reduce transaction costs and gas fees on Layer-2 networks, providing cost savings and improved affordability for users.

Ethereum Price Prediction

As the Dencun upgrade approaches, analysts are expressing optimism about the price potential of Ethereum (ETH). One such analyst is Ali, a technical and on-chain analyst with a significant following on a platform referred to as X. Ali believes that ETH’s path to $5,000 is becoming increasingly clear as resistance levels diminish.

Ali points out a supply zone between $4,522 and $4,646, where approximately 600,000 addresses hold 1.63 million ETH. According to Ali, it’s not a matter of if, but when ETH will reach this price level. At the time of writing, Ethereum is trading at over $4,000, showing relatively little change in price over the past day.

However, it’s worth noting that Ethereum has experienced significant gains in recent months and years. Over the past month, Ethereum has increased by more than 51%, and over the past year, it has seen a remarkable growth of 156%. These positive price movements have contributed to the overall optimism surrounding Ethereum’s future performance.

It’s important to remember that cryptocurrency prices are volatile and can be influenced by various factors, including market sentiment, investor behavior, and broader market conditions. Therefore, while analysts may provide insights and predictions, it’s essential to approach such forecasts with caution.

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