Ethereum’s Dencun Upgrade: Lowering L2 Transaction Costs on the Horizon
Ethereum’s Dencun upgrade has successfully integrated “proto-danksharding,” after completing its final stage of testing via the Holesky testnet.
This upgrade will lower transaction costs on Ethereum layer 2s, which could drive mass adoption of the ecosystem.
The Ethereum Dencun upgrade was successfully forked on Holesky on February 7, according to the latest data. After finalizing testing via the Holesky testnet it is now awaiting a date for its mainnet deployment. The team notes that the upgrade will introduce “proto-dank sharding.” This will be introduced through Ethereum Improvement Proposal-4844.
The upgrade is widely expected to drive down transaction costs on Ethereum layer-2s. This will be achieved through “blobs,” which is the reduction in costs achieved by introducing a novel compartmentalized container for data, which will allow for the temporary storage and access of large amounts of off-chain data by Ethereum nodes. Furthermore, proto-dank sharding will help to alleviate the expenses associated with rollups, a process that typically consolidates transactions and data off-chain while presenting computational proof to the Ethereum blockchain.
This suggests that Layer-2s could attract more developers and users, propelling them to higher prices and possibly new all-time highs.
In addition, CoinShares Ethereum research associate Luke Nolan has warned that Ethereum’s ETH supply could be affected by the Dencun upgrade. The analyst explains that we could see gas prices settle at lower levels, which means less ether is burned.
Although the official mainnet launch has not been confirmed, developers are expecting the so-called hardfork to be triggered when the blockchain reaches slot 8626176, occurring at 13:55 UTC on March 13. It is important to note that this is way off the initial target with developers initially hoping to launch at the end of 2023.
Ethereum (ETH) Investors Eye a New All-Time High
In the wake of the upgrade, Ethereum’s native token, ETH, has rallied in the past 24 hours by 2% to extend its weekly gains by nearly 7%.
Investors are more optimistic about greater positive performance once the upgrade is deployed on the mainnet. Interestingly, this might very well coincide with the approval of the first Ethereum spot ETF. As CNF reported, experts foresee the approval by the SEC succeeding in May. Bloomberg analyst Will Clemente has recently predicted a 70% chance of an ETF being approved on May 23rd.
If the approval is successful, this would usher in a new wave of institutional investment, with billions flowing into the 2nd largest cryptocurrency by market cap. Investors will be eyeing the altcoin’s all-time high of $4,878.26, reached in 2021.
Filed under: Bitcoin - @ February 8, 2024 5:22 pm