As a researcher with extensive experience in the cryptocurrency and blockchain space, I have closely followed Ethereum’s development and the challenges it has faced regarding scalability. The Dencun upgrade, which combines elements from Cancun and Deneb, is a significant milestone in addressing these issues. While it doesn’t offer an immediate solution to all scalability problems, it lays the groundwork for future sharding implementations.
The Ethereum blockchain has historically struggled with scalability, especially during times of heavy usage which result in network congestion, sluggish transaction speeds, and expensive gas fees. These problems negatively impact user experience and restrict the network’s ability to accommodate a wide array of applications. The Denas upgrade, rolled out in March 2024, is a major step forward in addressing these challenges by paving the way for future scalability enhancements.
The Dencun update, a fusion of features from Cancun and Deneb enhancements, doesn’t instantly resolve all scalability challenges for Ethereum. However, it represents a significant step forward in the platform’s evolution. At the heart of Dencun lies the concept of “proto-danksharding,” paving the way for future sharding rollouts. Sharding is the process of splitting the blockchain into smaller parts called shards, enabling each to handle transactions individually through parallel processing. The anticipated outcome is a substantial improvement in Ethereum’s transaction handling capacity in due time. Although Dencun doesn’t directly implement sharding yet, it lays the essential technical groundwork for its future implementation.
As a analyst, I would explain it this way: I’d like to clarify that Dencun’s primary objective doesn’t revolve around cutting down transaction fees directly on the Ethereum mainnet. Instead, its focus lies in enhancing fee efficiency within Layer 2 networks. These networks operate above the Ethereum blockchain and collectively process transactions off-chain before submitting them back to the mainnet. Consequently, this mechanism helps alleviate network congestion and may lead to cost savings for users by potentially reducing fees.
As a crypto investor, I’m excited about Dencun’s standout feature – EIP-4844. This innovation brings down the expense for Layer 2 networks to submit their batched transactions to the Ethereum blockchain. The anticipated outcome is an improvement in the efficacy of Layer 2 solutions, possibly leading to reduced fees for users. However, it’s essential to keep in mind that the actual fee decrease might not be as pronounced as initially predicted. Close monitoring will be necessary to assess the long-term implications on transaction costs.
As a researcher studying Ethereum’s upgrades, I’ve observed an unexpected outcome of the Dencun update: its effect on Ethereum’s supply. The decrease in transaction fees following this upgrade resulted in less ETH being burned compared to before. Previously, network activity and higher fees led to more ETH getting destroyed, creating a deflationary impact on its total supply.
CryptoQuant, a renowned South Korean blockchain analysis firm, has conducted a new assessment following Ethereum’s Dencun upgrade. This update, as per CryptoQuant’s evaluation, could potentially reshape Ethereum’s journey towards becoming a “stable store of value” or “sound money,” which refers to a currency that retains or increases its worth over an extended period.
See our full analysis 👇
— Julio Moreno (@jjcmoreno) May 13, 2024
The other problem for Ethereum is that once the U.S. SEC approved 11 spot Bitcoin ETFs, many people thought that probably within a few months, the SEC would start approving some, if not all, of the several pending spot Ethereum ETF proposals. Unfortunately, with the SEC’s recent crackdown against the Ethereum ecosystem (e.g. Uniswap receiving a Wells notice last month), it seems that SEC Chair Gary Gensler sees Ether (ETH) as a security (which is what Consensys CEO Joseph Lubin suspects) and therefore the expectations for spot Ethereum ETFs getting approved in the U.S. sometime in 2024 have been dramatically lowered. Eric Balchunas, a Senior ETF Analyst at Bloomberg, says he wouldn’t be surprised if we do not see an approval until 2025.
According to Eric Balchunas, an ETF analyst at Bloomberg, there’s a possibility that the U.S. Securities and Exchange Commission (SEC) could reject the application for an Ethereum spot exchange-traded fund (ETF) on May 23, 2022. If approved, this might not happen until the end of 2025. It’s important to note that if Donald Trump wins the upcoming presidential elections, there could be a change in SEC leadership, which may be more favorable than the current chair, Gary Gensler. DLNews.
— Wu Blockchain (@WuBlockchain) May 11, 2024
Over the last year, Ethereum’s value relative to Bitcoin has decreased by approximately 30%. The accompanying ETH–BTC price chart illustrates this trend.
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2024-05-14 16:09