Importance of Ethereum Dencun Upgrade: A Game-Changer in Blockchain

Dencun, the latest software update for the Ethereum network, is set to modify it significantly. This update, dated March 13th, is projected to lower operational expenses, particularly on layer 2 networks. Such advancements may pave the way for open access, which might spark unprecedented creativity in the Ethereum ecosystem, affecting decentralised finance (DeFi), gaming, and a variety of other applications.

Source: Techopedia
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Ethereum Dencun Upgrade’s Impact on Layer 2 Networks

The Dencun upgrade combines the “Deneb” and “Cancun” updates, offering an innovative method of data storage within the Ethereum network. Layer 2 blockchains, including well-known chains such as Arbitrum, Polygon, and Base (of Coinbase Global Inc.), have previously used Ethereum to store data.

This strategy, while safe, has resulted in high expenses due to the indefinite storing of data in all Ethereum nodes. By introducing “blobs” as a new data repository, such charges are predicted to diminish, lowering transaction costs from a dollar to pennies, and sometimes less than a cent.

This lowering is a technological advance and a big shift that is expected to significantly improve the end-user experience. According to Roberto Bayardo, an engineer on Coinbase’s Base team, these improvements have no direct impact on users, unlike prior updates like the September 2022 Merge, which lowered Ethereum’s energy consumption. Dencun, on the other hand, has a direct impact on customers and may result in long-term application innovation and user interaction.

Expanding the Ethereum ecosystem.

Blobs will enable expansion in the Ethereum ecosystem by lowering Layer 2 network expenses. Ed Felten, retired professor and co-founder of Offchain Labs (developers of Arbitrum), discusses the possibilities of advanced AI-driven behaviours in gaming and DeFi applications, which were previously limited by expensive costs. This Ethereum Dencun update may also encourage the development and deployment of other Layer 2 chains, lowering the barriers to launching new projects.

Jim McDonald, one of Attestant’s co-founders, forecasts a “huge Layer 2 chains explosion” in the coming months. Such operational chains could be more cheaper and allow for the launch of unique goods, such as single-event or use-specific chains, thereby contributing to the development of a diversified and dynamic blockchain ecosystem.

Implementation and Outlook

Many Layer 2 chains are expected to transition quickly to blob, while others, such as Arbitrum, will require little time to discuss governance and voting. Despite these immediate benefits, the cost savings are clear, but there is no guarantee that they will remain.

As demand for blob storage grows, so will the cost, potentially diminishing the current cost advantage. However, this period of low prices is projected to extend several months, creating an important opportunity for innovation and growth within the Ethereum ecosystem.

Karl Floersch, co-founder of the Optimism project, says that while the first charge drop may boost development and acceptance, the system must prepare for future cost increases. However, the Dencun upgrade marks a key milestone in the development of Ethereum and its associated networks, ushering in a more diverse, inventive, and accessible blockchain environment.

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