Ethereum Cancun Upgrade: Why Arbitrum, Optimism Will Profit Massively

The tentatively slated Ethereum upgrade Cancun / Deneb for autumn will be a game-changer for layer-2 rollup technologies such as Arbitrum and Optimism. The basis for this will be the Ethereum Improvement Proposal (EIP) 4844, which will be the main code change of the upgrade, as Christine Kim, vice president in Galaxy Digital’s research team explained.

Last Friday, 15 June, the 111th All Core Developers Consensus (ACDC) call was held. Chaired by Ethereum Foundation Researcher Alex Stokes, participants finalized the final scope of the upgrade. And EIP 4844 (proto-thanksharding) is being implemented.

Ethereum: Next Upgrade Is Huge For ARB And OP

As Kim writes, EIP 4844 introduces a new transaction type called “blobs”. This increases the data and storage requirements of Ethereum blocks and creates a new fee market to value blobs separately from regular transactions.

Data blobs are the first milestone for Ethereum’s full Danksharding, which will allow rollups such as Arbitrum and Optimism a 100-fold increase in capacity. This is realized by allowing nodes to safely process multiple blobs per block than the initial maximum set by EIP 4844.

Ethereum Proto vs- Full Danksharding | Source: Twitter @christine_dkimImportantly, EIP 4844 does not improve Ethereum’s scalability as a general-purpose blockchain for uting transactions and smart contracts, Kim notes. It does not significantly increase or improve the transaction capacity of Ethereum itself.

However, proto-Danksharding reduces the cost of transferring large amounts of data to Ethereum and thus lowers the operating costs of rollups. This is of equal importance, as recent years have seen a surge in transactional activity from rollups such as Arbitrum and Optimism. While Ethereum mainnet transactions per second (TPS) reached a maximum of 20 TPS this year, L2 TPS peaked above 50.

Compared to the cost of deploying code and transactions directly on Ethereum, rollups have saved end users and dapp developers over 99% in gas fees. The goal of EIP 4844 is therefore of great importance for scaling Ethereum.

“Blob blockspace will be auctioned according to its own fee market, modeled after the fee market design of EIP 1559,” says Kim who emphasizes that there are many parallels to the introduction of blobs on Ethereum and the introduction of segregated witness (segwit) on Bitcoin. However, one of the main differences between segwit and EIP 4844 is the expected long-term impact of these code changes.

Benefits of EIP 4844 | Source: Twitter @christine_dkim## Arbitrum (ARB) Price At Crucial Resistance

In recent weeks, ARB has shown relative strength compared to OP. The ARB price has swept the previous low and now needs to overcome resistance at $1.03 to enter the trading range from May 6 to June 10. If the ARB price fails to do so in the next few days, a price discovery to the downside could be imminent. Otherwise, a rise to mid-range resistance at $1.15 could be on the table.

Arbitrum price swept previous low, 4-hour chart | Source: ARBUSD on TradingView.comFeatured image from iStock, chart from TradingView.com