Ethereum (ETH) recently completed a significant software upgrade known as Dencun, aimed at enhancing the cost-effectiveness of utilizing the network ecosystem. This update specifically focuses on Layer 2 (L2) networks like Arbitrum (ARB), Polygon (MATIC), and Coinbase’s Base, which are interconnected with Ethereum.
With Dencun, transaction costs on these networks have seen a notable decrease, with fees plummeting from dollars to cents or even fractions of a cent. This reduction in fees is expected to stimulate the development of new applications and services on the Ethereum network by significantly cutting down expenses.
The Dencun upgrade introduces a new data storage system, departing from the traditional method of storing Layer 2 data on Ethereum itself. By utilizing a new “blobs” repository, data storage costs are reduced as information is stored for a limited duration of about 18 days rather than indefinitely.
One of the key advantages of the Dencun upgrade lies in its impact on decentralized exchanges (DEXs) and gas costs. Projected gas costs for popular Layer 2 networks like Arbitrum, Optimism, and Coinbase’s Base are anticipated to see a substantial decrease. For instance, the expected savings could lead to a reduction in Arbitrum’s swaps from $2.02 to $0.40, Optimism’s swaps from $1.42 to $0.28, and Coinbase’s Base swaps from $0.58 to $0.01.
After successfully launching the upgrade on the mainnet, Ethereum Foundation core developer Tim Beiko expressed satisfaction with the accomplished work, emphasizing the complexity and collaborative effort involved. This upgrade marks a significant step towards enhancing efficiency and cost savings on Layer 2 networks interconnected with Ethereum.
Additionally, the Dencun upgrade is expected to generate increased demand for ETH, potentially triggering a renewed uptrend that could bridge the gap between current trading prices and its previous all-time high (ATH) of $4,878 achieved in November 2021. As Layer 2 networks embrace this update, enhanced adoption, usage, and accessibility within the Ethereum community are anticipated.
