Dencun Upgrade Steamlines Ethereum: Promises Lower Transaction Fees Amid High Gas Prices
Summary:
The Ethereum mainnet's Dencun upgrade, implemented on March 13, aims to lower transaction fees and enhance scalability despite its limitations. Repackaging nine unique Ethereum Improvement Proposals, the hard fork modifies transaction processing and network consensus. However, while an improvement, users desiring lower fees will need to sacrifice decentralization and security through use of L2s. Despite promises of lower fees, Ethereum's gas fees remain high, with users paying above 72 gwei.
The Dencun upgrade to the Ethereum mainnet was successfully implemented at 13:55 UTC on March 13. Allegedly, Dencun will notably decrease transaction costs for layer-2 networks and bolster the overall scalability of Ethereum, marking the most anticipated hard fork since the Merge. However, this upgrade will not rectify all the shortcomings of layer-2 solutions according to Arthur Breitman, co-founder of Tezos blockchain, who outlined to Cointelegraph: “The Dencun upgrade merely expands the data available for rollups on Ethereum, thus potentially dropping transaction costs for these L2 solutions. However, rollups based on Ethereum remain heavily limited by throughput and are compelled to adhere to strong centralization measures.”
Nearly one year after the Shanghai upgrade in April, the rollout of Dencun allows network participants to unstake their Ether for the first time since the transition to proof-of-stake in the aftermath of the Merge. The Dencun hard fork merges nine unique Ethereum Improvement Proposals (EIPs). The titular Dencun pairs together the predecessors Cancun upgrade on Ethereum’s performance layer and the Deneb upgrade on its consensus layer. Cancun concentrates on improving transaction management and processing, while Deneb is designed to better how network participants reach consensus on blockchain state.
James Wo, CEO and founder of Digital Finance Group, emphasized the introduction of data blobs through EIP-4844, also called proto-danksharding, as a notable aspect of the upgrade: “Proto-danksharding’s goal to decrease layer-2 transaction costs with improved data availability is a significant step toward establishing Ethereum as a scalable settlement layer.”
However, Max Wadington, a research analyst at Fidelity Investments, specified in a March 6th report that the expected fee reductions won't impact Ethereum mainnet users, "For the time being, to benefit from this fee change, users have to compromise on decentralization and security by using L2s instead of Ethereum. Although we predict this will prompt more users to bridge assets elsewhere, we firmly believe transaction on Ethereum for application-specific needs will still be the preferred approach (particularly for high-value transactions) as L2 platforms evolve.”
Despite the promise of lower fees, Ethereum's mainnet continues to experience high gas fees, above 72 gwei. Data from Etherscan reveals that an average swap on the network costs users $86.15 in gas fees with nonfungible token sales averaging at $145.60 in gas.
Source: Ycharts, launched Dencun upgrade and Ethereum's gas fee.
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Published At
3/13/2024 4:55:06 PM
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