The highly anticipated Dencun upgrade for the ethereum (eth) ecosystem is on the horizon and promises to bring significant cost reductions and notable changes in Layer 2 (L2) networks. The update, scheduled for March 13, will introduce a new data storage system known as blobs, which will reduce congestion on the ethereum network and drive key new features in several areas.
ethereum Dencun Update
As highlighted in a recent Bloomberg ethereum-software-upgrade-is-all-about-cost-cutting-this-time-eth” target=”_blank” rel=”nofollow”>reportDencun aims to reduce the cost of Layer 2 networks like Arbitrum (ABR), Polygon (MATIC), and Coinbase's Base by allowing previously expensive transactions to become significantly cheaper.
In particular, transactions that used to cost $1 can now cost as little as a cent, the report notes, while others that used to cost pennies may be reduced to a fraction of a cent. This cost reduction is expected to greatly improve the end-user experience and is a significant improvement over previous updates, such as the September 2022 “Merge.”
One of the most crucial aspects of the Dencun update is the introduction of blobs, a new type of data repository for Layer 2 networks. Currently, Layer 2 block chains They store their data on the ethereum network, resulting in substantial storage costs that are passed on to applications and users.
However, with stains, Layer 2 It will store your data for a significantly shorter period, around 18 days, which will result in lower costs. While this change sacrifices permanent storage of a complete record of all transactions, it frees up more space on the ethereum network for other transactions, reducing congestion.
ai-powered trading strategies
According to the report, the introduction of blobs through the Dencun update also paves the way for the use of artificial intelligence (ai) in various applications. For example, games can incorporate ai-controlled non-player characters, allowing for advanced gameplay capabilities and a deeper experience.
In decentralized finance (DeFi), automated market makers can incorporate “complex trading strategies” powered by artificial intelligence models. This new flexibility and complexity is expected to foster innovation and drive the development of advanced applications in the ethereum ecosystem.
Additionally, the Dencun upgrade is expected to significantly reduce the operating costs of Layer 2 chains. Previously, launching and operating a Layer 2 project required considerable venture capital backing. However, Bloomberg reports that with the cost reductions achieved by Dencun, small teams will be able to launch and maintain Layer 2 chains.
While the adoption of blobs and the associated cost advantages are expected to generate immediate benefits, it is worth noting that the cost of stains may increase over time as demand grows.
How could Dencun increase the price of eth?
While the price of eth has corrected by over 3% in the last 24 hours, resulting in a current trading price of $3,916, the Dencun upgrade has the potential to have a positive impact on its price.
The upgrade aims to significantly reduce the costs of Layer 2 networks and improve the overall user experience, making ethereum a more attractive platform for decentralized applications (dApps) and other use cases. By reducing transaction fees and improving scalability, Dencun could attract more users and developers to the ethereum ecosystem, which could increase demand for eth tokens.
Despite the ongoing correction, it is worth noting that the current price of eth is not far from its two-year high of $4,084. However, it is important to consider that the price has formed a double cap pattern on the daily time frame for two consecutive days, which may present a short-term hurdle for the eth price. The market reaction and eth's ability to break through its nearest resistance level remains to be seen.
Featured image from Shutterstock, chart from TradingView.com
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