Ethereum Cancun Upgrade Countdown, Layer 2 Enters Fee Reduction Era

It is expected that at 21:55 on March 13, Beijing time, Ethereum’s Cancun Upgrade (Dencun Upgrade) will be officially deployed on the main network. This is the next step for Ethereum in 2023. A major upgrade nearly a year after the Shanghai upgrade was completed in April.

The Shanghai upgrade aims to unlock staking and rewards for validators who stake ETH, while the core of the Cancun upgrade is the introduction of data from the Ethereum scalability solution (protodanksharding) Unit Blob achieves the effect of reducing Rollup Layer 2 network transaction costs.

This means that after the Cancun upgrade, the gas fees of Layer 2 networks such as Optimism and Arbitrum will be significantly reduced. Some developers estimate that the cost can be reduced by 75 %. The decrease in fees will directly benefit ordinary users and DApp applications that use these online transactions.

Nine major improvement technologies deployed to the main network

Ethereum After Fangzhu.com completes the Cancun upgrade, the network's scalability, security and user experience will be upgraded through the improved technology of the nine major proposals (EIP). According to Ethereum’s official information, these nine proposals will be integrated into Ethereum’s consensus layer and execution layer according to different functions.

9 proposals and features for Cancun upgrade

Among these EIPs are Many functions are directly related to the user experience of the Ethereum ecosystem. For example, EIP-7044 is designed to allow validators locked on Capella to voluntarily sign out.

Currently, validators need to pledge 32 ETH to ensure that they will process transactions normally and maintain the safe operation of the network. If they perform their duties normally, they will receive rewards. If the validators fail to perform their duties, they will be rewarded. Responsibility, part of the pledged ETH will be lost due to fines.

Users who do not have 32 ETH can currently choose third-party staking platforms such as Lido to participate in the verifier camp with a small amount of ETH, but users cannot It is guaranteed that these third-party verifiers will not default, but once they default, ordinary users may also suffer losses.

Now, EIP-7044 will allow validators and ETH stakers to sign instructions to exit positions in smart contracts and specify when to execute them.

In addition to EIP-7044, EIP-4844 has attracted the most attention from the outside world. This is also the core function of the Cancun upgrade and will increase the data storage of Rullup class Layer 2. space, while greatly reducing transaction costs, and also laying the foundation for the subsequent upgrade of Ethereum with a sharded data structure.

EIP-4844 proposed the "protodanksharding" sharding solution, which is an initial Layer2 expansion solution and one of the future Danksharding sharding technology routes Intermediate steps. The Danksharding route aims to enable Ethereum Layer 2, especially Rollups, to still provide cost-effective transaction capabilities despite mainnet congestion. It is an important means for Ethereum expansion and will be implemented in long-term upgrades.

The core of protodanksharding’s implementation is the introduction of the “Blob” sharded data unit, which is designed as part of the Ethereum transaction structure and is better than the current calldata that stores transaction data. More flexible and effective because it carries transactions stored on the consensus layer and will be automatically deleted within 1-3 months. This method helps reduce storage costs and can send Rollup transaction data at a lower cost, thereby ultimately reducing gas fees for users.

Layer2 network fees will drop significantly

From Ethereum Judging from the short-term and medium-term development of Ethereum, Rollup may be Ethereum’s only scaling solution that does not require trust permission. Due to the high transaction fees on the Ethereum mainnet, the ecosystem urgently needs to take steps to transition to Rollup.

Indeed, Rollup-like Layer 2 networks significantly reduce users’ transaction costs: transaction fees for Optimism and Arbitrum are often about 3% lower than those on the Ethereum mainnet - 8 times, while ZK Rollups have better data compression capabilities and the cost is 100 times lower than the Ethereum mainnet.

On March 12, Ethereum’s Gas Fee was 57 Gwei, worth $4.8; while during the same period, Arbitrum’s Gas Fee was 0.2 Gwei, equivalent to about 0.017 US dollars, while the Gas Fee of the Optimism network is close to 0 Gwei, equivalent to approximately US$0.000089.

@msilb7, a user from the Web3 data platform Dune, calculated that if the price of the total daily gas consumption of Ethereum and each Layer 2 is calculated, the current Ethereum main network will The gas price per second is as high as US$198.82, Optimism is US$3.23, and Arbitrum is US$6.32.

On March 5 this year, the gas fee of the Ethereum main network soared again, once rising to an average of 98 Gwei. This is the highest since May 2023. The highest level since the beginning of the month. According to Ethereum browser data, users spend an average of US$87.45 in gas fees for a transaction, and the average gas fee for NFT transactions that day reached US$147. On that day, the transaction fees of Optimism and Arbitrum remained consistently flat, with each transaction fee in the single digits.

Even so, these fees are still expensive for many users. EIP-4844 introduced in the Ethereum Cancun upgrade will resolve this issue. Among Layer 2 transaction fees, the largest expenditure item is the "call data" fee, which currently accounts for more than 80% of the total Layer 2 transaction fees. The mechanism of "temporarily storing data" in Blob units is very beneficial for short-term transactions.

According to calculations, the cost of Blob will be less than 0.001 ETH, and the transaction fee of Rollups will also be less than 0.05 USD. Developers at Offchain Labs predict that, assuming current network traffic levels, the gas cost of the Layer 2 network will drop by 75% immediately due to the Cancun upgrade.

There is no doubt that this will help users and DApps adopt the Ethereum ecosystem on a large scale, and further promote the ecological prosperity of Rollups such as Optimism and Arbitrum.

Binance data shows that as of 11:00 on March 13, ETH was trading at approximately US$4,020. At around 1:00 a.m. that day, affected by the short-term sell-off of BTC, ETH was trading at 24 The hourly lowest price was US$3,828; the Optimism governance token OP was reported at US$4.42, with a trend similar to that of ETH, with a 24-hour lowest price of US$4.11; the Arbitrum governance token ARB was reported at US$2.06, with a 24-hour lowest price of US$1.90.

It is worth noting that ARB will usher in a large number of unlocked warehouses during the Cancun upgrade. Data from digital asset tracker Token Unlocks shows that on March 16, Arbitrum will release approximately 1.111 billion ARB, accounting for approximately 76% of the circulating supply. As of press time, the value of this batch of ARB to be unlocked is 2.266 billion. Dollar.

Among them, Arbitrum will unlock 673.5 million ARB for its team and consultants, which is approximately 1.38 billion US dollars at current prices); additionally unlocked 438.2 million ARB were early investors in Arbitrum, which is currently valued at approximately $902 million.

Crypto analysts remind that the amount of ARB unlocked this time accounts for a large amount of the circulating supply. According to Arbitrum rules, no ARB will be released initially before the unlock date. Instead, it will be put on the market all at once on a designated issuance date. Holders need to pay attention to the price fluctuations of ARB.