Ethereum Dencun Upgrade: Impact on L2 and gas Fees

Ethereum is set to undergo the Dencun upgrade on March 13, which is considered an important milestone, especially for Ethereum L2 networks. This upgrade is expected to reshape the outlook of the Ethereum blockchain, with the most attention being paid to the impact on L2 networks and gas fees.

The core content 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 the transactions, allowing rollup networks to temporarily store data, significantly reducing the cost of storing data on the Ethereum L2 network, and this advantage will ultimately benefit users.

Impact of Dencun Upgrade on L2

Different L2 networks have their own views on the impact of the Dencun upgrade.

Some developers of an optimistic rollup network believe that Dencun will reveal some interesting phenomena that will help reduce L1 fees. Since the data usage of different operations varies between L1 and L2, each ecosystem will independently decide how to price and handle data between L1 and L2.

The development team of a certain ZK rollup network has been preparing the infrastructure for the launch of proto-danksharding. They believe that blobs will greatly reduce costs, but the specific reduction depends on the pricing of blob usage. If current data is added to blobs, assuming the price decreases by 10 times, costs may drop by 90%.

A well-known trading platform's 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 decrease by 90% to 95%. However, the low cost may stimulate an increase in usage, and ultimately fees could be 2 to 5 times lower than now, bringing the cost of each transaction down to between 5 and 15 cents.

A co-founder of a certain polygon network stated that the decrease in fees is mainly a supply and demand issue, with increased supply leading to greater data availability on Ethereum, but the specific reduction is difficult to predict. He also pointed out that there are differences in cost structure between ZK rollups and optimistic rollups.

Impact on gas fees

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

L2 developers predict that the upgrade will significantly reduce gas fees, making transactions on the scaling network more economical and easier to verify. A product lead from an L2 network stated that once all L2 networks update their settlement contracts, users will save a substantial amount on gas fees.

It is estimated that after the Dencun upgrade, assuming the current network traffic levels remain unchanged, gas fees on L2 networks could immediately decrease by 75%. This is mainly due to the introduction of "blobs" and proto-danksharding, providing a more cost-effective method of data storage 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 likened to expanding Ethereum into a four-lane highway, with the potential for further expansion in the future.

A partner of a well-known non-custodial Ethereum Staking service pointed out that the most important aspect of the Cancun upgrade is to significantly reduce the gas fees for L2, gaining an advantage in competing with other competing public chains. At the same time, considering that the L2 sequencers are also "big consumers" of gas on the Ethereum mainnet, after the upgrade is completed, we can also see a slight decrease in the gas fees on the Ethereum mainnet.

The Transformation of Transaction Efficiency and Costs

The anticipated decline in gas fees could have far-reaching effects. In the future, users may even not need to bear gas fees. Some product leaders of L2 networks envision an abstract scenario of gas fees, similar to how Web 2 giants attract users by covering the costs of services like video conferencing and email.

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 transactions, including NFT trading and other retail activities, will permanently migrate to L2 networks.

Some developers believe that the Dencun upgrade will fundamentally change the way users interact with Ethereum, while the mainnet will gradually move to the background. This shift will eliminate the high costs associated with on-chain transactions, making activities such as NFTs more accessible and allowing users to afford the related costs.

Experts predict that by removing barriers to the integration of on-chain elements, cross-chain development can be promoted across various media and platforms. For example, scenarios may arise where video games that generate NFTs interact with DeFi protocols and seamlessly utilize social media at minimal cost.

Ethereum's Transition to a Rollup-Centric Model

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 attention on L2. Compared to the underlying chain responsible for scaling, rollups are likely to become the future trend. Major rollup participants have begun to coordinate 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, Opcodes, etc. With the implementation of EIP-4844, the ecosystem will begin to see the practical effects of proto-danksharding. Additionally, as more L2s join the blob space, the impact of cost reduction may gradually diminish.

Summary

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