Ethereum at $4,000 Is Just Getting Started

Source: Kaola Finance

Ethereum successfully broke through $4,000 last week, but in fact, this is just the beginning.

Why do you say that? Because if all goes well, the Ethereum Dencun upgrade will be carried out on Wednesday, March 13, and Dencun is likely to be the next key tipping point for Ethereum?

What is Dencun?

Dencun is a compound word formed by combining the words Cancun (Cancun) and Deneb. Cancun represents the execution layer upgrade of Ethereum, while Deneb represents the protocol layer upgrade. Therefore, Dencun upgrade is a comprehensive name for Cancun upgrade and Deneb upgrade.

Ethereum founder Vitalik Buterin once outlined the future Ethereum 2.0 upgrade route in six concise stages: The Merge, The Surge, The Scourge, The Verge, The Purge and The Splurge. Each stage revolves around the upgrade of a specific theme and function, and the Dencun upgrade is an important technical upgrade in The Surge stage. The most eye-catching one is EIP-4844. In addition, there are EIP-7514, EIP-1153, EIP-4788, EIP-5656, EIP-6780.

EIP-4844 in the Dencun upgrade will greatly improve the storage efficiency of the Ethereum system and reduce transaction costs. You must know that high gas fees have always been the biggest obstacle to the development of Ethereum. The world is suffering. Gas costs a lot. According to reports, users have paid more than $100 in transaction fees during peak hours. According to Etherscan data, the average gas fee for a swap transaction is currently approximately $79. EIP-4844 adopts an advanced technology called "Blob", which will use an innovative temporary data storage mechanism on the Ethereum network by implementing the Proto-Danksharding process, which will help reduce L2 transaction fees. .

Not only that, EIP-4844 will also introduce Blob Gas, an independent billing system that follows its own pricing rules to calculate basic fees. The format of blob data is preset to be consistent with the format in future sharding specifications. This design allows Rollup to effectively alleviate network congestion, while a separate fee market ensures lower fees, making it more economical than the current Calldata storage method.

Ethereum at $4,000 is just the beginning?

If Dencun is successfully upgraded, it will undoubtedly be a good thing for Ethereum.

According to data from Coinglass, ETH futures open interest has exceeded $13 billion and, as of press time, is at the highest level since November 2021.

Not only that, an evaluation of the historical performance of the token shows that in November 2021 The bull market on the 16th caused investors to buy futures contracts. On that day, ETH's open interest in futures reached a peak of $14 billion. The recent increase in the value of ETH has led to a surge in positive funding rates on cryptocurrency exchanges. Coupled with the increase in open interest, if this development trend is followed, it is not impossible for the ETH price to break through the highest price point of $4,891.  

On the other hand, the number of pledges and validators on the Ethereum chain is also is growing. According to Dune Analytics data, at the time of writing this article, the total pledged amount of the Ethereum beacon chain has exceeded 31 million ETH, touching 31,664,744 ETH, which is approximately US$126.658 billion at the current price. The number of network validators is close to 990,000, both record highs. All time high. Not only that, since the Shanghai upgrade, the net inflow on the Ethereum chain has been close to 11.7 million ETH, and the data performance is quite “respectable”.

Summary

Whether the Dencun upgrade can finally stimulate Ethereum to a higher level may still need to be seen.

Although this upgrade is an important step in the right direction, some community members believe that Dencun is just a short-term patch, and what Ethereum needs is a sustainable long-term solution because of this The focus of this upgrade is to make data storage more efficient, which is undoubtedly beneficial, but the long-term problem facing the Ethereum network is capacity, and future development must focus on expanding network capacity to support the increasing number of transactions being executed. From this perspective, a multi-chain solution may make it easier to achieve this goal.

In addition, according to data from Glassnode (as shown above), moving from 7 days Looking at the average, the number of validators leaving the Ethereum network has increased by 42% in the past two weeks, a trend that has caused a brief decline in network participation. According to data from Glassnode, as of this writing, the PoS network’s participation rate is at a two-week low of 99.46%, and these issues may also require developers and the community at large to solve.

Of course, overall, the Dencun upgrade is a huge evolution of Ethereum, solving the problems of immediate and long-term scalability, security and efficiency. At the same time, in the bull market environment, Ethereum breaks down Historical highs and new highs are not an unattainable thing, let us wait and see!