News - How this upgrade is changing Ethereum

By Mike Hesp

How this upgrade is changing Ethereum

Ethereum (ETH)
Optimism (OP)
Arbitrum (ARB)

Compared to Solana, Ethereum scales relatively slowly. A new upgrade aims to increase transactions per second.

The Dencun upgrade, specifically the introduction of EIP-4844, will have a significant impact on the Ethereum network and the Layer 2 sector in particular. The upgrade aims to significantly increase transactions per second (TPS), with a long-term goal of scalability in excess of 100,000 TPS. This quantum leap in efficiency will be accompanied by a dramatic reduction in gas fees on Layer 2 networks such as Arbitrum and Optimism, which can increase tenfold after implementation.

Such a recalibration of fee structures promises to bring Ethereum's layer 2 networks back to competitive levels with the fees of layer-1 blockchains such as BSC, Avalanche and Solana. This should not only strengthen Ethereum's technological leadership, but also significantly improve the network's accessibility and profitability for a broader user base.

Current transaction costs on different Layer 2 networks.

Source: IntoTheBlock

What does this mean for the Ethereum mainchain?

The Dencun upgrade and the introduction of EIP-4844 will initially mean a potential reduction in direct gas fee revenue for the Ethereum mainchain from Layer 2 networks, as the upgrade will significantly reduce the cost of using it. Nevertheless, this change could boost the adoption and growth of L2 networks, which in turn will increase transaction volume and activity on them.

In the long run, this could lead to an increase in indirect revenue for the mainchain, as a larger user base and higher transaction volume could increase the need for interactions with the mainchain. This would further strengthen the Ethereum mainchain as the central security and trust anchor of the entire Ethereum ecosystem. And consolidate its role in an increasingly diversified network of L2 solutions.

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