Dencun Upgrade: Ethereum looks to Increase Efficiency, ETH Price Falls Post-Launch
Summary:
The Ethereum upgrade, Dencun, launched on March 13, aiming for a more cost-efficient network. However, following this, Ether's (ETH) price fell from $4,082 to $3,932, continuing to trend downward. The main aim of Ethereum's successive upgrades is to enhance efficiency by improving transaction speed, decreasing gas fees, or altering the consensus mechanism. EIP-4844, included in the Dencun upgrade, aims to decrease layer-2 transaction costs and increase data availability. Despite these upgrades, the price of ETH has fluctuated with little impact from the upgrades. Currently, ETH is trending lower, and if selling pressure increases, its price could decline further.
The long-awaited Ethereum upgrade Dencun was finally launched on March 13, paving the way for a more cost-effective network. However, this didn't prevent the price of Ether (ETH) from plummeting - it fell sharply from $4,082 to $3,932 after the upgrade according to CoinMarketCap data. Moreover, as evidenced by data from Cointelegraph Markets Pro and TradingView, the downward trend for Ether continued on March 14 with a 3% decrease in the last 24 hours, trading at $3,848 at the time the figures were compiled.
The main goal of the Ethereum network's successive upgrades has always been to enhance efficiency, either by boosting transaction speed, reducing gas fees or modifying the consensus mechanism, therefore enhancing the overall network value.
Richard Meissner, co-founder of Safe, suggested that Dencun is set to revolutionize the way Ethereum developers create smart contracts, thus paving the way for more secure and user-centric applications. Independent investor VirtualBacon lauded Dencun upgrade's success, highlighting its goal of a 75% reduction in layer-2 transaction costs, which could significantly remodel the ecosystem's potential.
After the successful implementation of Dencun, the Ethereum layer-2 network Starknet confirmed that transaction costs had been effectively slashed by claiming that "Among Validity Rollups, Starknet has the highest share of L1 data availability costs, thus it gained the most from this upgrade. Therefore, we have witnessed an impressive reduction in gas fees, by over 90%."
Market analyst Psquare Daily echoed these sentiments, stating that Ethereum Layer-2 (L2) networks have seen dramatic reductions in transaction fees, with some experiencing reductions up to 99%.
Meanwhile, the Dencun upgrade comprises numerous Ethereum Improvement Proposals (EIPs) such as EIP-4844, which aims at decreasing layer-2 transaction fees and augmenting data availability.
Past Ethereum upgrades haven't had a significant impact on ETH's price. Following the Berlin upgrade in April 2021, Ether's price rallied by 7.5% one week before the upgrade. Just before the August 2021 London upgrade, ETH's price rose by 3.4%.
But the June 30, 2022, Grey Glacier upgrade resulted in a 3.8% price drop. By the end of that week, ETH experienced a decline from $1,275 to $1,043. Furthermore, Ethereum's transition from a proof-of-work consensus mechanism to a proof-of-stake algorithm during "the Merge" hard fork resulted in a 20% increase in ETH’s value, followed by a 25% weekly drop.
Currently, with the implementation of Dencun, ETH's trending lower. If more factors add to the selling pressure, such as the dwindling optimism for a spot Ethereum ETF, ETH's price could experience a more substantial plummet. Please note that this article does not constitute investment advice. All investments and trading actions come with risks, and readers should carefully research before making a decision.
Published At
3/14/2024 9:28:59 PM
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