Introduction

Due to the crazy rise of Bitcoin, this bull market is also nicknamed the “Bitcoin Bull Market.” Since the adoption of the Bitcoin ETF, a large amount of money has poured into the Bitcoin ecosystem. This is an unprecedented bull market phenomenon. Bitcoin continues to rise in response to memes, and other crypto tracks such as AI and gamefi have taken turns to pull the market, but L2 seems to still be sleeping.

On March 13, according to Etherscan data, the block height of the Ethereum mainnet reached the Dencun upgrade scheduled epoch (269568).

The main goals of the “Dencun” upgrade are to improve the scalability and modularity of the L2 network, enhance the security features of the Ethereum network, and improve overall usability. The proposal that has attracted the most attention is EIP-4844 (Proto-Danksharding), which is a pre-plan for the full version of sharding expansion Danksharding. The entire set of sharding solutions revolves around Rollup for on-chain expansion, aiming to expand L2 Rollup, help L2 reduce fees, increase throughput and pave the way for full sharding.

Simply put, the biggest positive factor of Dencun is the reduction of L2 transaction fees.

Ethereum core developer eric.eth has said that the implementation of EIP-4844 will cause the gas cost of Ethereum L2 transactions to drop to about $0.01. According to a website launched by Optimism, the transaction cost of executing a swap on Uniswap will be reduced from $0.59 to $0.01 in real-time.

Large-cap share rotates to Ethereum and altcoins

According to on-chain analyst @0xCryptoChan, as the price of Bitcoin continues to rise, the percentage of BTC held by holders for more than 155 days is decreasing, indicating a shift in liquidity away from Bitcoin.

With the double expectations of the Decun upgrade and Ethereum ETF, Ethereum has risen from $2300 to $4000. Now that Dencun has activated its mainnet and gas fees have decreased, it is expected to encourage users to participate in more applications and increase their on-chain activities.

For this reason, some people in the community believe that EIP-4844 will reduce the overall income of Ethereum.

While it is true that the fees L2 pays for DA on Ethereum will decrease, this reduction is unlikely to have a significant impact on Ethereum’s overall fee generation. L2’s DA fees only account for approximately 7-10% of Ethereum’s total fee revenue. For example, in February 2024, of the $355 million in total fees, only $33 million was attributed to L2 publishing data on Ethereum, with the majority of fees generated by on-chain activity on the Ethereum mainnet.

Furthermore, with the widespread outbreak of airdrops, lower gas fees on L2 may further incentivize airdrop farmers to increase their on-chain interactions to increase their chances of receiving allocations. This increase in activity could in turn increase the overall value generated within the network, benefiting Ethereum and its ecosystem.

On the other hand, according to @cheng_shutong, it can be seen from the contract funding rate that the rate of most altcoins has reached an annualized rate of 100% or even higher, indicating that most retail investors have successively broken new highs in Bitcoin and Ethereum. Stimulated by the epidemic, they are all trying to catch up with the collective increase in the market.

Dencun may benefit the RaaS market

One view is that after the Cancun upgrade, more Dapps will independently make a Rollup, which will be conducive to the prosperity of the RaaS market. Previously, Charles d’Haussy, CEO of the dYdX Foundation, also told BlockBeats that if ecological technology wants to develop further, it needs to build its chain.

The hype points of Decun essentially lie in the introduction of three key enhancements through EIP-4844 and Blob-carrying transactions. In addition to reducing transaction fees, these enhancements include enhancing Ethereum’s scalability and enabling the community to test the network’s ability to handle increased data loads in production, preparing for the full shard upgrade.

Compared to existing methods, EIP-4844 and Blob-carrying transactions can more efficiently utilize block space. Additionally, since blobs are completely different types of transactions, they have their fee market and are not affected by the increased activity of regular transactions on the Ethereum mainnet.

According to analysts at Bankless, in the long run, as L2 becomes cheaper, it will open up design space for building unique applications on it. For example, many high-throughput-demanding applications, such as AI and dePIN projects, can choose to build on L2, or even L3.

Is L2 still not a match for Solana?

According to L2BEAT data, as of the time of writing, after the Decun upgrade, among the top L2 solutions, the DA layer has switched to Ethereum mainnet Blob, with ZK Rollup-based solutions like ZkSync and Starknet, and Optimistic Rollup-based solutions like Optimism and Base. Based on actual tests, after the switch, gas fees on these four L2 solutions have decreased by an order of magnitude.

However, @0xNing0x pointed out that the current reduction in gas fees was achieved while major gas-consuming protocols like Arbitrum and Blast have not switched their DA layers, and the current DA fees are still two orders of magnitude higher than Celestia DA fees.

Additionally, Arbitrum stated that ArbOS Atlas has introduced additional fee reductions for Arbitrum One, which will be activated on March 18th. After activation, the remaining cost per compressed byte on L1 will decrease from 32 gwei to 0, and the minimum base fee on L2 will decrease from 0.1 gwei to 0.01 gwei.

Therefore, the specific effectiveness of the Decun upgrade still needs to be assessed after all major L2 solutions have switched their DA layers and after adjustments to Rollup parameters and market competition strategies are balanced.

From the current market performance, Ethereum and general-purpose L2 solutions have not seen significant gains. @0xNing0x believes that after the Decun upgrade, Ethereum’s mainnet business model will primarily focus on selling block space, and the revenue from application layer taxes will shift to general-purpose L2 solutions. However, general-purpose L2 teams have strong ideological tendencies and are not direct competitors to chains like Solana.

SOL’s price has been steadily rising during this cycle, and even the token prices of projects in the entire Solana ecosystem have experienced a general increase. Other projects in the ecosystem have also followed Solana’s pace, steadily launching projects in multiple sectors such as DeFi, Depin, and AI, driving Solana’s TVL (total value locked) to rise steadily, reaching $3.6 billion at the time of writing.

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