- The next Ethereum major network upgrade, “Dencun”, is set to take place on Wednesday.
- Dencun will lower the transaction fee on many Layer 2 networks that are built upon the Ethereum base blockchain.
- The Ethereum developer community is pushing hard to achieve mass-scalability through Layer 2 Blockchains.
- According to reports from Grayscale Digital Assets and Fidelity Digital Assets, the Ethereum update may be beneficial for increasing the userbase.
On Wednesday, Ethereum will undergo an update to its network called Deneb-Cancun or Dencun. The Dencun is intended to improve the user experience of some Layer 2 users and lower transaction fees.
Ether ( , ETH), native currency of the Ethereum Blockchain, surged above $4,000 on Wednesday morning, before settling a little below that level at 10:10 a.m. Eastern.
What is Dencun Ethereum Update?
Dencun prioritizes security, scalability and efficiency through various Ethereum Improvement Proposals.
The Ethereum Foundation has announced that the EIP 4844, for proto-danksharding is the biggest change. It aims to reduce gas costs for Layer 1 network and increase the ability of the network to process more transactions via the secondary layers.
As the update is rolled out, exchanges could experience delays processing Ethereum transaction on Wednesday. The update is expected to cause disruptions for an hour or more on Wednesday morning, around 9:45 am Eastern Time. However, this could be changed. 2 kraken has budgeted for a 15-minute delay. “3
What’s changing? Blobs and Rollups. Gas.
Rollups are layer 2 networks that build on the Ethereum base network. They’re secondary Blockchains. Rollups bundle transactions in an effort to increase transaction volume. Initial verification of these transactions occurs off-chain, but transactions are finalized on the Ethereum main blockchain.
6 This data storage is responsible for more than 90% of all fees charged to users by rollups.
Dencun’s upgrade will change that. Information related to Layer 2-networks can be added into the Ethereum base blockchain as “blobs”, which are temporary and more efficient than permanent data. The blobs will only be accessible for 18 days as of the time this article was written. 4 It is meant to reduce costs.
Each byte of information that L2s save on Ethereum is roughly equivalent to 16 gas. Fidelity Digital Assets noted in its report on the upgrade that the introduction of blobs, and the new fee market for blob-data data storage has reduced the cost of gas to just 1 a byte. This is an overall gas cost saving of up to 94%. “6
It is worth noting that Ethereum users who are on the main chain or Layer 1 will be less likely to see the benefits of the new lower fee structure on Layer 2 after the upgrade.
What is the most competitive and accessible Ethereum?
Ethereum is currently hindered in its performance by slow transactions, low bandwidth and high fees for users. Ethereum’s average transaction fee of $2.3 on February 22nd is much higher than alternatives such as Solana. Grayscale, a crypto asset manager in a recent report, said that this could drive users away to alternative chains.
Grayscale’s report stated that the Dencun upgrade could help Ethereum to compete with other blockchains in terms of speed and scalable.
Fidelity points out, too, that the changes made to the Ethereum blockchain could also help it transition from a general purpose blockchain into a database of Layer 2 networks. Fidelity stated that the best way to measure the success of Dencun’s upgrade is to monitor the number of Layer 2-users via metrics such as active address.