Ethereum Dencun Upgrade: Transformation of L2 Networks and gas Fees

On March 13, Ethereum plans to undergo the Dencun upgrade, which has sparked heated discussions about its impact on L2 networks and gas fees. Developers believe that this upgrade is an important milestone for the Ethereum ecosystem, especially for L2 networks.

The core of the Dencun upgrade is EIP-4844, also known as "proto-danksharding". It will introduce a new category of transactions that lowers the cost of rollup transactions through data blobs. These blobs are located independently within transactions and can be temporarily used by rollup networks or other protocols to store data. This will significantly reduce the costs of storing data on L2 networks on Ethereum, and this cost reduction will ultimately benefit users.

Impact of Dencun Upgrade on L2

Multiple L2 network development teams have made predictions about the impact of the Dencun upgrade:

1. The Arbitrum development team Offchain Labs believes that Dencun will help reduce L1 fees. The data usage of different operations on L1 and L2 varies greatly, so each ecosystem will decide how to price and process data on L1 and L2.

2. The development team of Starknet, Starkware, stated that blobs will significantly reduce data costs, but the specific reduction depends on the usage price of the blobs. If the price decreases by 10 times, the cost could drop by 90%.

3. Jesse Pollak, the creator of the L2 network Base under a trading platform, estimates that the open blob space of proto-danksharding is about four times the current usage of Ethereum rollups. At the current demand level, transaction fees could decrease by 90% to 95%. However, the low cost may stimulate an increase in usage, ultimately leading to fees that could be 2 to 5 times lower than now, reducing the cost per transaction to 5-15 cents.

4. The co-founder of Polygon believes that the decrease in fees is mainly a supply and demand issue. The increase in supply has improved the data availability of Ethereum, but the specific reduction is difficult to predict. They also pointed out that there are differences in the cost structure between ZKrollup and optimistic rollup.

Impact on gas fees

Experts generally believe that the Dencun upgrade will significantly reduce gas fees, making transactions on L2 networks more cost-effective. Some developers predict that, assuming network traffic remains at current levels, gas fees on L2 networks could drop by 75% immediately. This is mainly attributed to the introduction of "blobs" and proto-danksharding, which provide a more cost-effective data storage method for Ethereum.

Proto-dankSharding allows L2 data to be temporarily stored for about a month, significantly reducing storage costs while maintaining security. This improvement has been compared to expanding Ethereum into a four-lane highway, with the potential for further expansion in the future.

A partner of a certain non-custodial Ethereum staking service pointed out that the most important aspect of the Dencun upgrade is to significantly reduce the gas fees for L2, giving it a competitive advantage against other competing L1 chains. At the same time, since L2's sequencer is also a major source of gas consumption on the Ethereum mainnet, gas fees on the Ethereum mainnet may also see a slight reduction after the upgrade is completed.

The Revolution of Transaction 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 costs. Experts have envisioned an abstract scenario of gas fees, similar to how Web 2 giants attract users by covering service costs.

Although the vision of no gas fees mainly exists on L2 networks, the Ethereum mainnet will continue to play a key role in ensuring data security and facilitating inter-network communication. It is expected that most on-chain activities, including NFT transactions, 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 shifting to the background. This transition will eliminate the high on-chain transaction costs, making activities like NFTs easier to popularize.

Ethereum's Shift Towards Rollup-Centric Architecture

The Dencun upgrade represents that Ethereum is shifting towards an L2-centric scaling approach. Ethereum aims to slow down changes to its core components and focus innovation and user aspects on L2. Rollups are likely to become the trend of future development. Major rollup participants have already begun coordinating with each other at L2 conferences to discuss and propose improvements.

It is worth noting that changes to the EVM will not be directly applied to the Ethereum mainnet, such as new forms of account abstraction, precompiles, and Opcodes. With the implementation of EIP-4844, the ecosystem will begin to see the real impact of proto-danksharding. However, as more L2s join the blob space, the effect of its cost reduction may gradually diminish.

Conclusion

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 functionalities, further promoting innovation and adoption of L2 networks, fundamentally changing the way users interact with the Ethereum ecosystem. This upgrade marks an important step for Ethereum towards becoming a more efficient and economical blockchain platform.