Ethereum (ETH): Upgrade Dencun in preparation – improve scaling

The next major upgrade for Ethereum (ETH) is approaching with Dencun. The developers want to enable more transactions in particular. It remains to be seen whether Ethereum Dancun will arrive in 2023 or be delayed until 2024.

Ethereum (ETH) is the undisputed number two among the most important global cryptocurrencies behind Bitcoin (BTC). Ethereum owes a good part of its success to its constant technological development; since its launch in 2015, around 20 major upgrades have been added to the network. With the Dencun upgrade (also known as Cancun), Ethereum is about to take the next big step forward technologically in the coming months. The specialists at DWF Labs Research have compiled important details about Ethereum Dancun in a blog post  and we provide you with the highlights here:

– Ethereum Dencun is to implement a total of nine enhancement proposals (EIP), of which EIP 4844 is the one that eyes are mainly focused on.

– This is because EIP 4844 is intended to enable “blobs” and “proto-thanksharding” on Ethereum. Behind these technical terms is a first solution approach to enable more transactions per second (TPS) on Ethereum.

– Currently, Ethereum’s blockchain only handles around 12 TPS. This has led to bottlenecks and high transaction fees. One consequence: so-called Layer 2 solutions for Ethereum, such as Arbitrum (ARB) or Optimism (OP), are experiencing record traffic.

– With the Dancun upgrade, Ethereum itself should be able to process many times more TPS, which could also benefit the Layer 2 solutions. In addition, Dancun is expected to introduce a separate auction system for transaction fees generated by “blobs” and “thanksharding.”

– Ethereum founder Vitalik Buterin this summer named scaling the network as one of its main goals, explicitly including Layer 2 solutions. If Upgrade Dancun works as conceived, a constructive coexistence of Ethereum as Layer 1 with Layer 2 providers is expected.

For Ethereum’s important Decentralized Finance (DeFi) line of business, Upgrade Dancun is expected to provide significant spare capacity that, in duo with lower transaction fees, could lead to refreshed appeal. Most recently, it has been observed that Staking is becoming more popular on Ethereum, while DeFi is shrinking for ETH. This trend should be corrected, also to demonstrate Ethereum’s multi-functionality into areas such as blockchain gaming and digital identity.

Conclusion: Ethereum Dancun – waiting for upgrade has begun

Originally, Upgrade Dancun for Ethereum was planned for later this year. However, on the part of the developers, it is already being hinted that ETH Dancun could be delayed and then come in the first quarter of 2024. So for investors with a medium- and long-term perspective, the wait for Ethereum Dancun has begun. What remains important: EIP 4844 has the potential to impact Layer 2 business models as well, because Ethereum will then be able to organize more TPS itself.

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