Ethereum Dencun upgrade before final round of testing – what’s changing for ETH?

Ethereum (ETH) is awaiting its next major upgrade, known as Dencun. It will be deployed to a final testnet on Wednesday. Dencun is supposed to fundamentally improve Ethereum, here are the details.

It has become common practice for Ethereum (ETH) to go live with a major technological upgrade roughly once a year. The number two cryptocurrency thus demonstrates continuous development and responds to challenges facing the Ethereum ecosystem. Work on the upcoming ETH upgrade Dencun (also known as Cancun) has been underway since summer 2023 and the timetable for its release has recently been firmed up, according to developer Tim Beiko. Upgrade Dencun is scheduled to be installed on the Ethereum testnet Holesky on Wednesday (February 7) as the last round of testing before the mainnet.

Two problem areas are particularly pressing for Ethereum and both are to be addressed by Upgrade Dencun: Scalability and transaction costs. “Proto-Danksharding” is what ETH developers call a concept that integrates layer-2 solutions more deeply into Ethereum. For years, many Ethereum projects have been switching to Polygon (MATIC), Arbitrum (ARB) and other layer-2 solutions to validate transactions and smart contracts. The final results are then irrevocably documented in the actual Ethereum blockchain. This method makes it possible to significantly reduce transaction fees and circumvent the low capacity (around 20 transactions per second) of the Ethereum blockchain.

Dencun with “Proto-Danksharding” will now promote layer-2 solutions for Ethereum quasi officially. In the future, the Ethereum ecosystem should be able to handle more than 100,000 transactions per second with the interaction of layer 1 and layer 2. One innovative idea here is “blobs”. They are used to create data packets temporarily and offline and delete them once they have been confirmed. This reduces the storage pressure on Ethereum and should also lower transaction fees. The aim here is to reach the price levels of Ethereum competitors such as Solana (SOL).

Conclusion: Dencun upgrade could influence Ethereum price curve

The upgrade Dencun is scheduled to go live on the Ethereum mainnet in March. In the run-up to other major upgrades on Ethereum, impulses on the price curve of ETH could be observed. After all, Ethereum is always concerned with keeping the ecosystem attractive for crypto projects from sectors such as decentralized finance (DeFi) or blockchain gaming. Transaction fees and processing time play a decisive role in this. If Upgrade Dencun works as planned, Ethereum would have solved two important tasks with the help of layer-2 solutions, at least for the time being.

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