The Dencun upgrade aims to reduce transaction fees and enhance scalability on the Ethereum network. Learn about its features and impact.
The latest upgrade, known as Dencun, has been successfully deployed on the Ethereum mainnet as of 1:55 pm UTC on March 13.
This upgrade has been eagerly anticipated within the Ethereum community, being hailed as one of the most significant since the Merge. It is anticipated to bring about a notable reduction in transaction fees for layer-2 networks, thereby enhancing Ethereum's scalability.
However, Arthur Breitman, co-founder of the Tezos blockchain, suggests that while Dencun is a step forward, it may not fully address all the limitations of layer-2 solutions. In his words to Cointelegraph:
“The Dencun upgrade primarily focuses on extending the data usability for rollups on Ethereum, which should result in lower transaction costs for these layer-2 solutions. While it's a positive step, rollups built on Ethereum still face significant throughput constraints and are compelled to adopt centralized measures.”
The launch of Dencun follows the Shanghai upgrade in April 2023, which facilitated the unstaking of Ether (ETH) for network participants, marking Ethereum's transition to a proof-of-stake network post-Merge.
The Dencun hard fork incorporates nine Ethereum Improvement Proposals (EIPs), combining elements from the Cancun upgrade focused on the execution layer and the Deneb upgrade on the consensus layer. The Cancun portion aims at refining transaction management and processing, while Deneb targets consensus mechanisms for agreeing on the blockchain's state.
Among the notable features introduced in this upgrade is the implementation of data blobs through EIP-4844, also referred to as proto-danksharding, which James Wo, CEO and founder of Digital Finance Group, highlights as pivotal for enhancing data availability and establishing Ethereum as a scalable settlement layer.
Despite the anticipated fee reductions, it's noted that Ethereum mainnet users may not immediately benefit. According to a report by Max Wadington, a research analyst at Fidelity Investments, users seeking reduced fees may need to compromise on decentralization and security by transacting on layer-2 solutions instead of directly on Ethereum. This might prompt more users to bridge assets to alternative platforms. Nonetheless, Ethereum remains the preferred choice for application-specific purposes, particularly for high-value transactions, as layer-2 platforms evolve.
Gas fees on the Ethereum mainnet continue to remain high, currently averaging above 72 gwei. Etherscan data indicates that an average swap costs users $86.15 in gas fees, while nonfungible token sales amount to an average of $145.60 in gas fees.
