Ethereum Dencun Upgrade: Reshaping the Blockchain Landscape

Ethereum is set to undergo the Dencun upgrade on March 13, and this significant update has sparked discussions in the industry about how it will affect the second layer network (L2) and gas fees. Developers generally believe that this upgrade will become an important milestone for the Ethereum ecosystem, especially with profound impacts on L2 networks.

The core of the Dencun upgrade is EIP-4844, also known as "proto-danksharding". It will introduce a new type of transaction category that reduces rollup transaction costs through data blobs. These blobs exist independently in transactions, allowing rollup networks or other protocols to temporarily store data, significantly reducing the data storage costs of L2 networks on Ethereum, ultimately benefiting users.

The Impact of the Dencun Upgrade on L2

Different L2 networks have their own views on the impact of the Dencun upgrade:

• The development team of a certain L2 network believes that Dencun will expose some interesting phenomena that will help reduce L1 costs. Since different operations have varying data usage on L1 and L2, each ecosystem will independently decide how to price and process data on L1 and L2.

• The team of another L2 network has been preparing the infrastructure for the launch of proto-danksharding. They believe that blobs will significantly reduce costs, but the extent will depend on the price of blob usage.

• The creator of an L2 network under a well-known trading platform estimates that the open blob space of proto-danksharding is about four times the current usage of Ethereum rollups. At the current level of demand, transaction costs could decrease by 90% to 95%. However, the low costs may stimulate an increase in usage, ultimately leading to fees that could be 2 to 5 times lower than they are now.

• The co-founder of a certain polygon network stated that the decrease in fees is mainly a supply and demand issue, with increased supply making data availability on Ethereum greater, but the specific extent of the decrease is difficult to predict.

Impact on Fuel Fees

Experts generally believe that the Dencun upgrade marks the arrival of a new era for Ethereum. It is seen as a key step in enhancing user experience and scalability, with the potential to address long-standing issues of gas fees and scalability.

L2 developers predict that the upgrade will significantly reduce gas fees, making transactions on the scaling network more cost-effective and easier to verify. A product manager of an L2 network stated that once all L2 networks update their settlement contracts, users can expect to save a substantial amount on gas fees.

Developers of a certain L2 network estimate that, assuming the level of network traffic remains constant, gas fees on the L2 network may drop by 75% immediately after the Dencun upgrade. This is mainly due to the introduction of "blobs" and proto-danksharding, which provide a more cost-effective data storage method for Ethereum.

A partner of a well-known non-custodial Ethereum staking service provider pointed out that the most important outcome of the Cancun upgrade is the significant reduction in fuel fees for L2, enhancing its competitive advantage over other public blockchains. At the same time, considering that the L2 sequencer is also a major participant in fuel consumption on the Ethereum mainnet, it is expected that fuel fees on the Ethereum mainnet will also see a slight decrease after the upgrade is completed.

The Revolution of Transaction Efficiency and Costs

The anticipated decrease in gas fees could have far-reaching implications. In the future, users may not even need to bear gas fees. A product manager from an L2 network envisioned an abstract gas fee scenario, similar to how Web2 giants attract users by covering the costs of services like video conferencing and email.

Although the vision of no gas fees mainly exists in L2 networks, the Ethereum mainnet will continue to play a key role in ensuring data security and facilitating communication between networks. It is expected that most on-chain activities, including NFT transactions, will permanently migrate to L2 networks.

Developers of a certain L2 network believe that the Dencun upgrade will fundamentally change the way users interact with Ethereum, with the mainnet gradually moving to the background. This shift will eliminate the high on-chain transaction costs, making activities like NFTs easier to popularize.

The Shift of Ethereum Towards Rollup-Centric

The Dencun upgrade represents Ethereum's shift towards an L2-centric scaling approach. Ethereum aims to slow down changes to its core components, focusing innovation and user aspects on L2. Rollups are likely to become a future trend. Major rollup participants have begun to coordinate with each other at L2 conferences to discuss and propose improvements.

It is worth noting that as more L2s join the blob space, the impact of cost reduction will gradually weaken. However, the implementation of EIP-4844 will allow the ecosystem to start seeing the real effects of proto-danksharding.

Conclusion

The Dencun upgrade is expected to usher in a new era of on-chain transactions for the Ethereum blockchain, achieving scalability and low costs. This upgrade will further drive innovation and adoption of L2 networks, fundamentally changing the way users interact with the Ethereum ecosystem. As the upgrade approaches, the industry is filled with anticipation for the future development of Ethereum.