Ethereum Dencun Upgrade: Impact on L2 and gas Fees

Ethereum plans to carry out the Dencun upgrade on March 13, which is seen as an important milestone, especially for Ethereum L2 networks. Discussions about how this upgrade will affect L2 and gas fees have been heating up.

The core content of the Dencun upgrade is EIP-4844, also known as “proto-danksharding”. It will introduce a new category of transactions that reduces rollup transaction costs through data blobs. These blobs are positioned independently within transactions, allowing rollup networks or other protocols to temporarily store data within them. This will significantly lower the cost of storing data on L2 networks on Ethereum, ultimately benefiting users.

The Impact of the Dencun Upgrade on L2

Developers of different L2 networks have varying opinions on the impact of the Dencun upgrade:

Developers of a certain L2 (optimistic rollup) network believe that Dencun will help reduce L1 fees. Due to the different data usage of various operations on L1 and L2, each ecosystem will decide how to price and process data on L1 and L2.

A certain ZK rollup network’s development team has been preparing the infrastructure for the launch of proto-danksharding. They believe that blobs will significantly reduce costs, but this depends on the price of blob usage. If existing data is added to blobs, assuming the price decreases by 10 times, then costs could drop by 90%.

The creator of another L2 network estimates that the open blob space of proto-danksharding is about four times the current usage of Ethereum rollups. At the existing demand level, transaction fees could drop by 90% to 95%. However, the low costs may stimulate an increase in usage, ultimately making fees 2 to 5 times lower than they are now, reducing the cost per transaction to between 5 and 15 cents.

Impact on gas fees

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

L2 developers predict that the upgrade will significantly reduce gas fees, making transactions on the expanded network cheaper and easier to verify. A vice president of product stated that once all L2 networks update their settlement contracts, users can expect to save a substantial amount on gas fees.

Developers estimate that if network traffic remains at current levels, gas fees on L2 networks may immediately drop by 75% after the Dencun upgrade. This is largely 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 aspect of the Cancun upgrade is to significantly reduce the gas fees of L2, giving it a competitive edge against other competing public chains. At the same time, since L2’s sequencer is also the main user of GAS consumption on the Ethereum mainnet, there may be a slight decrease in Ethereum mainnet gas after the upgrade is completed.

The Transformation of Trading Efficiency and Costs

The expected decrease in gas fees could have far-reaching effects. In the future, users may not even need to bear gas fees. Some experts envision a scenario where gas fees are abstracted, similar to how Web 2 giants cover service costs to attract users.

Although the vision of no gas fees primarily 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 transactions, including NFT transactions and retail activities, will permanently migrate to L2 networks.

Some developers 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 more accessible and reducing the burden on users.

A CEO of an L2 network predicts that by eliminating the barriers to integrating on-chain elements, cross-chain development across various media and platforms will thrive. For example, video games that generate NFTs may interact with DeFi protocols and seamlessly utilize social media at minimal cost.

Development Trends Centered on Rollup

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-level priorities on L2. Rollups are likely to become the development trend of the future. Major rollup participants have begun to coordinate with each other at L2 conferences, discussing and proposing improvements.

Changes to the EVM will not be brought to the Ethereum mainnet, such as new forms of account abstraction, precompiles, Opcodes, etc. With the implementation of EIP-4844, the ecosystem will begin to see the real impact of proto-danksharding. It is worth noting that as more L2s join the blob space, the cost-reducing effect will gradually diminish.

Summary

The Dencun upgrade is expected to usher in a new era of scalability and low-cost transactions on the Ethereum blockchain. It will significantly reduce gas fees and improve related features, further promoting innovation in L2 networks and a surge in adoption, fundamentally changing the way users interact with the Ethereum ecosystem.