Why the next phase of Ethereum upgrade matters? With the most recent software update for the Ethereum network, using the most commercially successful blockchain ecosystem in the world is going to become much more affordable.
Why the Next Phase of Ethereum Upgrade Matters
The update, known by developers as Dencun, is scheduled for March 13 and is anticipated to significantly reduce costs for what are known as Layer 2 networks, which are the hundreds of chains that connect to Ethereum and include arbitrum, polygon, and Coinbase Global’s base.
A transaction that would have cost one US cent to post might now only cost one cent, while another that would have cost one cent might now only cost a fraction of a cent.
Recognized as the biggest change to the end-user experience in the history of the Ethereum ecosystem, the upgrade will be considerably more apparent to users than the well-known September 2022 Merge, which drastically reduced Ethereum’s energy consumption. Transaction volume on Ethereum exceeds that of the Bitcoin network.
Ethereum will launch a new data storage system with Dencun, which combines the names “Deneb” and “Cancun” from the upgrade. The majority of layer-2 blockchains now use Ethereum for data storage.
More Ethereum Space for Other Transactions
Every Ethereum node has an endless supply of data, therefore storage often accounts for 90% of the expenses incurred by layer 2s. These costs are then passed on to apps, who then impose fees on users.
Layer 2s will be able to store their data in blobs, a new kind of repository, thanks to Dencun. Since the data would only be stored for roughly 18 days, blobs will be less expensive.
Blobs will free up more Ethereum space for other transactions as they grow in popularity, which should reduce the frequency of network congestion. However, it will eventually run out of space to hold a whole record of everything.
“You don’t get something for nothing, but I think it’s an excellent tradeoff for Ethereum to make,” stated Ed Felten, a retired Princeton University professor and co-founder of Offchain Labs, the company that creates arbitrum.
The Update May Also Encourage the Development of Further Chains
According to Felten, the change may encourage the usage of artificial intelligence in video games, as non-player characters can now display complex behavior that is powered by an AI model, something that was previously unaffordable.
Complicated, AI-driven trading methods may also be embedded by automated market makers in decentralized finance, where users can trade and borrow directly from one another.
Because layer-2 chains can now be operated far more affordably, the update may also encourage the development of further chains. A layer-2 initiative may now be able to launch and operate with a little staff, whereas in the past it required millions of dollars in venture capital support.
‘Ethereum’s Conventional Transaction’
Jim McDonald, a co-founder of Attestant, a company that assists in running the Ethereum network, said that it may be financially advantageous to start new layer-2 chains for a single vote, for a single day. One use for a chain might be to sell tickets for a certain event.
Layer-2 chains may need several hours or days to begin utilizing blobs. For example, Arbitrum anticipates switching to blobs “within a day or two” of the update, according to Felten, because the change must be approved by the decentralized governance structure of Arbitrum.
The chains can continue to employ Ethereum’s conventional transaction architecture in the interim. The cost advantage may eventually vanish since the blobs’ cost will rise as demand for them rises.
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