The Ethereum landscape is well-known for its propensity for innovation, with numerous upgrades being launched on the blockchain since its arrival on the market.
Dencun is the most widely-anticipated upgrade since the Merge, and it went live on the mainnet on March 13th. Investors have already noticed that the prices continue to rally, a sign that the bullish tendency is in full swing and that now is the best time to buy Ethereum with debit card before the prices become more elevated. But what can investors expect from Dencun in the long term?
Transaction fees
Throughout 2023, Ethereum was associated with higher transaction fees than usual. Known as gas fees in the ecosystem, they are required in order to conduct transactions successfully and execute contracts on the platform. The fees are priced in very small denominations of ether known as gwei. When the amount investors had to pay for transactions increased, many were worried that engagement rates would also decrease. However, higher network usage also makes the gas fees climb, creating a difficult conundrum.
However, network congestion can lead to delayed or even failed transactions and is a serious concern among investors. The Dencun upgrade aims to decrease gas fees while the network is fully functioning. This can be achieved with the help of a layer two solution known as blobs. This new technology will replace the previous call data, creating the medium for a fee reduction. Before it was launched on the mainnet, Dencun arrived on Testnets so developers could test its performance.
Layer – 2
The brunt of the advantages offered by the Dencun upgrade will be particularly notable on L2, so investors can expect to see the most pertinent results there. Just a few hours after the launch, users observed that the transaction fees had declined by as much as 99% in the aftermath of the upgrade. The Starknet, one of the most prominent Ethereum-based protocols, released a screenshot showing the fees were at $0.04 compared to a whopping $6 ahead of Dencun’s arrival. Some other platforms, like Base, Zora OP, and Optimism, similarly recorded a decline in their gas fees. All of them are in a similar range, around $0.5 to $0.064.
Dencun introduced nine separate Ethereum Improvement proposals, also known as EIPs. Among them are the previously mentioned blobs, which bypass the earlier systems to publish information on the mainnet, leading to faster transactions and significantly lower fees.
Scalability
The Dencun upgrade results from two years of work and continuous development. It has been referred to as the most complex fork to arrive in the Ethereum environment since the Merge and one of the most important since Ethereum’s launch on the financial market. Apart from lowering transaction fees, the update is also predicted to help with scalability. This is another concern for the marketplace, as the large amount of data on the blockchain can sometimes cause the system to lag behind.
The EIP-4844, also called proto-danksharding, is more than an enhancement for this area. It is a solution with the potential to change the environment on a fundamental level. It is set to decrease processing speeds while reducing transactional costs simultaneously. If this development reaches its full potential, it can enable Ethereum to act as a database for other decentralized ledgers in the future. This would create a more efficient and interconnected digital asset ecosystem, so the significance of this upgrade for Ethereum’s future cannot be overstated.
Both startups and developers will benefit from proto-danksharding and can leverage its abilities to create ETH network applications that are far more sophisticated than the previous ones. The new products should also be more scalable. It will also boost stakes and validators and enable them to experience much safer processes. Lastly, the entry barrier for new users might go lower, encouraging broader adoption rates.
Possible issues
Although the general consensus is that the Ethereum blockchain will benefit from the addition of the Dencun upgrade on the mainnet, some are less optimistic about its full scope. According to this view, Dencun is within the bare minimum that could be done to boost functionality, and the real change will stem from the addition of other solutions as well. Nonetheless, Dencun remains a step in the right direction and perhaps even the beginning of more significant changes. As centralization worries continue to mount, causing panic among investors regarding the future of the blockchain, solutions are definitely very much needed.
The Shanghai upgrade, launched in April 2023, changed the ecosystem for good as well by allowing users to unstake their staked coins. At the time, many believed that the move would destabilize the market and cause prices to plummet considerably. These predictions proved to be unfounded, and the market actually thrived as a result of the Shanghai upgrade. Interestingly, after a short initial period during which unstaking was the norm, investors began staking in record numbers. Analysts believed that the fact they knew they could withdraw their funds whenever they wanted acted as an incentive and boosted confidence levels among market participants.
The bottom line
Although the Dencun upgrade was just launched, investors have high hopes for its future. While it will probably not be a panacea that solves all the problems the marketplace is dealing with, it will undoubtedly improve several areas. The hard fork’s name is a mix of Cancun and Deneb. The former is the upgrade located with the execution layer, while the latter is situated on the consensus layer. Cancun aims to improve the management and processes powering transactions, while Deneb helps network participants deal with the blockchain.
However, the investors who want to enjoy the benefits will have to give up some of the control they have over their transactional processes and move to layer-2 solutions. So far, gas fees remain high on the mainnet, well above 70 gwei. That means an average transaction could cost as much as $86, with NFTs climbing close to $146. That is quite a lot to pay in gas fees.
Hopefully, as the upgrade gains more traction, it will work its magic and mediate these concerns as designed.
