On March 13, 2024, the Ethereum network underwent the Dencun upgrade, an important milestone in its development. This upgrade brings significant cost reductions to Ethereum’s Layer 2, opening up vast possibilities. In this report, HTX Ventures analyzes the impact observed one week after the Ethereum upgrade, focusing on cost reductions, network performance improvements, and its far-reaching impact on the entire Ethereum ecosystem.
HTX Ventures, as a stakeholder in Ethereum’s growth, is excited to see these new directions. Dencun upgrade is promoting the formation of a more inclusive ecosystem and paving the way for some more innovative and complex games, social finance (SocialFi), decentralized finance (DeFi), cross-chain interoperability and other applications.
HTX Ventures is the global investment arm of Huobi HTX, integrating investment, incubation and research to identify the best and most promising teams around the world. Currently, HTX Ventures has supported more than 200 projects across multiple blockchain tracks, and some of these high-quality projects have been listed on Huobi HTX for trading.
As you can see from the chart, the Ethereum market continues to be hot up until the date of the Dencun upgrade on March 13, 2024. Source: Google Finance
Cost reduction and network efficiency improvement
EIP 4844 Integration
The Dencun upgrade introduces EIP 4844, which aims to solve the problems of Ethereums high fees and slow processing times by implementing data blocks. Although it is still in the process of being integrated into rollup due to technical difficulties, significant improvements have initially been shown in Layer 2 gas costs:
- On each L2 platform, transaction fees have dropped significantly:
Changes in average transaction fees: Median decrease 50% -99% (dated March 14, source: DuneAnalytics Dashboard)
Arbitrum：$ 0.39 -> $ 0.14
Base：$ 0.37 -> $ 0.03
Optimism：$ 0.32 -> $ 0.01
zksync：$ 0.19 -> $ 0.1
Zora：$ 0.2 -> $ 0.001
- The cost of L2 publishing data has dropped significantly:
(Dated March 14, source: DuneAnalytics Dashboard)
Layer 2 successfully reduced the cost of publishing data in Ethereum by 88% by switching to data blocks for data publishing, from as much as $400 per transaction to about $40.
- Mainnet Gas fees have not been reduced:Currently, Ethereum Gas prices have not been significantly affected. However, as the Blob API continues to be adopted, a reduction in Ethereum gas fees may be observed. The fee reduction can be attributed to several factors including shifting rollup demand to blobs, which frees up capacity for the Ethereum execution layer, and the separation of Ethereum gas fees from blob fees.
source:https://ycharts.com/indicators/ethereum_average_gas_price
Future Outlook with Danksharding
Danksharding, a key part of Ethereum’s upgrade path, promises to further enhance network capacity and performance. Planned improvements include increasing the number of data chunks per block and exploring advanced data availability (DA) solutions like PeerDAS. At the same time, research on MEV resistance, Verkle trees, and network optimization continues, aiming to create a more efficient and easier-to-use Ethereum ecosystem.
HTX Ventures’ perspective
As a stakeholder in Ethereum’s growth, HTX Ventures is excited about these new directions. Dencun’s upgraded focus on fee reduction, scalability, security, and ease of use not only promotes the formation of a more inclusive ecosystem, but also provides a platform for some more innovative and complex games, social finance (SocialFi), and decentralization. Applications such as finance (DeFi) and cross-chain interoperability have paved the way.
Emerging Trends and Competitive Environment
- Due to the reduction in fees, the application chain will return to Ethereum in the form of rollup, coupled with the emergence of new L2 and L3 solutions, this will mark a major change within the Ethereum ecosystem.
- Competition among L2 solutions has intensified, emphasizing the need for founding teams to focus on users and developers, focusing on community building, infrastructure construction, and comprehensive growth strategies (including business development, sales, and marketing strategies).
other:
- The emergence of Eigenlayer brings to the Ethereum ecosystem the ability to expand outreach to numerous protocols, introducing greater flexibility and diversity, thereby ensuring that the ecosystem becomes more agile and adaptable, further enhancing the overall ecosystem Resilience and scalability.
- The pending approval of the ETH ETF, as well as the SEC’s decision on Ethereum’s classification, will have a significant impact on the asset’s exposure in traditional markets. HTX Ventures is closely monitoring developments related to this incident.
in conclusion
HTX Ventures remains committed to supporting Ethereum’s development journey, providing comprehensive assistance to projects at the forefront of decentralized data innovation. By driving the development of cutting-edge technology, we aim to contribute to the long-term success and expansion of the Ethereum ecosystem. We believe that with the advancement of technology and the continuous efforts of the community, Ethereum will be able to unlock more potential and bring more value and possibilities to users and developers.
References
2. Tom Wan
3. HTX ETH Dencun Upgrade Twitter space
4. https://ycharts.com/indicators/ethereum_average_gas_price
about Us
HTX Ventures is the global investment arm of Huobi HTX, integrating investment, incubation and research to identify the best and most promising teams around the world. As a pioneer in the blockchain industry for ten years, HTX Ventures promotes the development of cutting-edge technologies and emerging business models in the industry, providing comprehensive support for cooperative projects, including financing, resources and strategic consulting, to establish a long-term blockchain ecosystem. Currently, HTX Ventures has supported more than 200 projects across multiple blockchain tracks, and some of these high-quality projects have been listed on Huobi HTX for trading. At the same time, HTX Ventures is one of the most active fund-of-funds (FOF) investors, working together with the worlds top blockchain funds such as Bankless, IVC, Shima, and Animoca to build a blockchain ecosystem.
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