News - Ethereum EIP-4844: Why the upgrade is bullish for L2 projects

By Mike Hesp

Ethereum EIP-4844: Why the upgrade is bullish for L2 projects

The next big Ethereum upgrade is just around the corner. What to know about EIP-4844 and why it is bullish for the L2 sector.

The recent hype surrounding the Pepe memecoins has shown once again that the Ethereum network still has not gotten its scale problem under control. The hype surrounding the frog token caused transaction costs on the world's largest smart contract platform to skyrocket. The result: a simple token exchange on decentralized exchanges such as Uniswap cost more than US$50.

Meanwhile, the fuss about PEPE seems to be abating. However, the cost for a normal token exchange is currently still between 10 in 15 US dollars - too high for mass adoption.

Not surprisingly, Ether's developer community is still busy making upgrades that improve Ethereum's scalability. One of these upgrades is ETH Improvement Proposal (EIP)-4844. It is expected to be implemented before the end of the second quarter of 2023.

What is the Ethereum EIP-4844 upgrade?

The EIP-4844 is a proposed upgrade to the Ethereum protocol that aims to reduce costs and increase the capacity of the ETH network. It aims to achieve these goals by introducing a new transaction type that accepts "blobs" of data.

This new transaction type allows large amounts of data to be stored on the Ether blockchain at a lower cost than before. This allows transaction data from Layer 2 networks to be stored more efficiently on the main ETH network. This makes Layer 2 networks cheaper and can increase the overall transaction capacity of the ETH ecosystem.

Why is the upgrade beneficial for L2 projects?

EIP-4844 can be particularly beneficial for Layer 2 rollup networks such as Arbitrum, Optimism or Starknet. This is due to the following three factors:

Cost reduction: the introduction of blob transactions lowers gas costs for L2 networks such as Arbitrum. This is because blob transactions allow Layer 2 networks to store their off-chain processed transactions on the Ethereum mainchain at a lower cost than before.

Increased scalability: L2s can process more transactions per second through EIP-4844. This is because they unlock more transaction capacity due to the improved way they store their transactions on the Ethereum Mainchain.

More security: EIP-4844 introduces a new security model that enhances the security of Layer 2 solutions such as Arbitrum. It makes it harder for malicious actors to manipulate these networks.

The EIP-4844 upgrade thus makes ETH-L2 networks especially attractive to users and developers. Therefore, it does not seem far-fetched that its use may be further stimulated by the upgrade.

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