The Dencun hard fork of Ethereum introduces fee stabilization and scalability enhancements, benefiting layer-2 networks and improving transaction management and consensus.
The recent Dencun hard fork for Ethereum has been hailed as a monumental upgrade, marking a significant milestone since the Merge. Live on mainnet as of March 13, this update has garnered attention primarily for its promised reduction in transaction fees for layer-2 scaling networks. However, according to Nick Dodson, co-founder and CEO of Fuel Labs, the true value lies in fee stabilization:
“While many discuss the fee reduction aspect of EIP-4844, it's essential to recognize its role in fee stabilization. The upgrade focuses on expanding capacity and scalability rather than solely lowering fees."
Several Ethereum L2s experienced a substantial median transaction fee reduction of up to 99% post-upgrade, including Starknet, Optimism, Base, and Zora OP mainnet.
Dodson emphasizes that while the fee reduction benefits the industry significantly, the primary advantage lies in enhancing network scalability and stabilizing current fees for future user influx:
“The increased network capacity will not only lower layer-2 fees but also make data availability more cost-effective as we expand data blob capacity.”
The Dencun hard fork integrated nine Ethereum Improvement Proposals (EIPs). The first segment, Cancun, aimed at enhancing transaction management and processing on the execution layer, while the second part, Deneb, focused on improving the consensus layer, crucial for agreeing on the blockchain's state.
Dodson believes the upgrade will significantly enhance Ethereum's overall scalability and throughput:
“With these developments, Ethereum is poised to accommodate a more extensive user base, advancing its capability to facilitate various rollups and execution methods beyond its previous limitations.”
Post-upgrade, Ether (ETH) experienced a minor decline of 2.44% within 24 hours, trading at $3,956 as of 11:30 am UTC, as per CoinMarketCap data.
