Ethereum’s Dencum upgrade recently went live and there has been a noticeable drop in transaction fees across the board for Layer 2 protocols.
The scalability-focused hard fork is considered to be one of the most significant since 2022’s ‘Merge’ when Ethereum transitioned from a proof-of-work (PoW) to a proof-of-stake (PoW) blockchain.
Dencun saw the implementation of ‘proto-dark sharding’ and introduced nine different Ethereum Improvement Proposals (EIPs) alongside a new transaction data type called ‘blobs’ that enables data storage on the Ethereum blockchain.
Dencun Upgrade Reduces Gas Fees and Introduces New Datatype For Storage
The data blobs allow L2s to bypass the traditional “call data” process to publish information on the Ethereum mainnet, thus enhancing efficiency, decentralization, and security while supporting faster transactions at lower fees.
The hard fork’s deployment of blob-carrying transactions has led to network fees significantly lowering on Ethereum’s Layer 2 scaling blockchains like Optimism (OP), Starknet (STRK), Base, Arbitrum (ARB), and Zora.
Popular Ethereum L2 Starknet witnessed a 99% reduction in gas fees since the upgrade. The scaling protocol shared a snapshot of its latest gas fee, which has come down to $0.04 from over $6 pre-Dencun.
The average transaction fees for other Layer 2s also witnessed decreases, such as Optimism dropping to $0.05, Base to $0.026, $0.001 on Zora, $0.5 on Arbitrum, and $0.16 on Era – a zkSync network running on Ethereum.
Users also noticed that trading on Ethereum-based decentralized exchanges (DEXs) was now comparatively cheaper. For instance, token swaps on Uniswap via Optimism now costs just $0.01 per transaction. This is a major drop in gas fees compared to pre-Dencun when it was around $1.
Meanwhile, Arbitrum has announced plans to launch the ArbOS upgrade that will introduce blob transaction support to rollup chains deployed on its network.
Experts View Dencun as a Temporary Fix for High Transaction Costs on Ethereum
Excited users were testing out the upgrade’s capabilities in unique ways. One of the most interesting cases that came about was when Ethereum developer Dan Cline uploaded the entire script of ‘The Bee Movie’ onto the blockchain for just $14.
Although his action was not a new application for Ethereum, it highlighted the Dencun hard fork’s potential to significantly lower transaction and storage costs for L2 networks on the mainnet.
Scalability and lowered gas fees were the main goals for the latest Ethereum upgrade. Early indications look positive for the world’s largest smart contract blockchain as it has helped several scaling solutions built on top of it cut transaction costs.
However, experts believe that Dencun might only be a temporary solution to an ever-lasting problem, and it won’t help scale the Ethereum blockchain.
There is also concern that the ease of uploading large datasets could lead to the misuse of blobs, such as spamming, which could result in increased fees in the future.
Furthermore, as Ethereum continues to grow in shape and size, there will be more L2 blockchains coming online, leading to increased competition in the space and eventually higher gas fees.
The upgrade seems to have proceeded without encountering any issues across most Ethereum scaling networks, except Blast – the blockchain powering popular NFT marketplace Blur, which initially had to halt its block production. However, the problems were swiftly addressed and solved by the team.
ETH Holders Ride on ‘Sell the News’ Wave as Ethereum Drops
More interestingly, Ethereum’s market value dipped post-Dencun, which some speculate was due to investors taking advantage of the market event to rake in profits.
At the time of writing, Ethereum (ETH) is trading at $3,628 – up 2.5% from its value during the previous day.
