Ethereum Dencun Upgrade: Reshaping the L2 Ecosystem and Transaction Cost

Ethereum is set to welcome the Dencun upgrade, expected to be implemented on March 13. This upgrade has attracted significant attention, particularly regarding its potential impact on Layer 2 (L2) networks and gas fees. Developers generally believe this will be an important milestone in the development of Ethereum, especially for the L2 ecosystem.

The core of the Dencun upgrade is EIP-4844, also known as "proto-danksharding". This improvement will introduce a new type of transaction that reduces rollup Transaction Cost through data blobs. These blobs can temporarily store data, significantly lowering the data storage costs for L2 networks on Ethereum, ultimately benefiting users.

The Impact of Dencun Upgrade on L2

Different L2 projects have varying focuses on their views regarding the Dencun upgrade:

Some developers of an optimistic rollup network believe that Dencun will reveal some interesting phenomena that will help reduce L1 costs. Due to the significant differences in data usage for different operations on L1 and L2, each ecosystem will determine how to price and allocate data between L1 and L2.

A certain ZK-rollup network team is ready for proto-danksharding. They expect that if the blob price decreases by 10 times, the cost may drop by 90%.

The creator of another L2 project estimates that the open blob space of proto-danksharding is about four times the current usage of Ethereum rollups. At the current demand level, the Transaction Cost could drop by 90% to 95%. However, the low cost may stimulate an increase in usage, and the eventual fees could be 2 to 5 times lower than they are now, bringing the cost of each transaction down to between 5 and 15 cents.

The co-founder of a certain polygon network stated that the decrease in fees is mainly a supply and demand issue, with increased supply improving the data availability of Ethereum, but the specific reduction is difficult to predict. They also pointed out the cost differences in proving data existence between ZK-rollups and optimistic rollups.

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, and it is expected to address the long-standing issues of gas fees and scalability.

L2 developers predict that after the upgrade, gas fees will significantly decrease, making transactions on the expanded network more economical and easier to verify. One development team estimates that assuming network traffic remains at current levels, gas fees on the L2 network could drop by 75% immediately. This is mainly due to the introduction of "blobs" and proto-danksharding, which provide a more cost-effective data storage method for Ethereum.

A partner at a well-known non-custodial Ethereum Staking service provider pointed out that the most important aspect of the Dencun upgrade is to significantly reduce the gas fees of L2, giving it an advantage to compete with other blockchain competitors. At the same time, considering that the L2 sequencer is also a "big spender" of gas on the Ethereum mainnet, we may see a slight decrease in the gas fees on the Ethereum mainnet after the upgrade.

The Revolution of Transaction Efficiency and Cost

The anticipated decrease in gas fees could have far-reaching implications. In the future, users may not even need to bear the gas fees. Developers have envisioned an abstract gas fee scenario, similar to how Web 2 giants attract users by absorbing service costs.

Although the ideal of zero gas fees mainly 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 activities, including NFT transactions, will permanently migrate to L2 networks.

A certain development team believes that the Dencun upgrade will fundamentally change the way users interact with Ethereum, as the mainnet will gradually shift to a behind-the-scenes role. This transformation will eliminate the high on-chain transaction costs, making activities like NFTs more accessible and reducing the burden on users.

Another L2 project leader expects that by eliminating the barriers to integrating on-chain elements, cross-chain development across various media and platforms will flourish. For example, he envisions NFTs generated in games being able to interact with DeFi protocols and seamlessly utilize social media at the lowest transaction cost.

The Transition of Ethereum Towards Rollup-Centric

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 experience on L2. Rollups are likely to become a major development trend in the future. Major rollup projects have begun to coordinate with each other at L2 conferences to discuss and propose improvements.

It is worth noting that certain changes to the EVM will not be directly applied to the Ethereum mainnet, such as new forms of account abstraction, precompiled contracts, Opcodes, etc. With the implementation of EIP-4844, the ecosystem will begin to feel the real impact of proto-danksharding. However, as more L2 projects with blob space are added, the effect of cost reduction may gradually diminish.

Conclusion

The Dencun upgrade is expected to usher in a new era of on-chain transactions for Ethereum, achieving higher scalability and lower costs. This upgrade will further drive innovation and adoption of Layer 2 networks, fundamentally changing the way users interact with the Ethereum ecosystem. With the implementation of the upgrade, we will witness a new chapter in the Ethereum ecosystem.