Dencun is now up and running! Has it truly succeeded in decreasing fees?

Ethereum’s highly anticipated update has finally arrived. Could this signal a turning point for lower user fees on the network?

Just before the release of the Dencun update, the average gas fee on Ethereum was 66 Gwei, which was one of the highest levels in the past six months. This meant that it cost $5.49 to transfer one Ethereum (ETH) and approximately $94.56 to exchange tokens on a decentralized exchange (DEX). The commission for selling one non-fungible token (NFT) on the Ethereum network would cost around $159.81.

The long-awaited Dencun update is now live, but has it solved the issue of high network fees? The developers aim to address this problem through “proto-danksharding,” which is the main component of the EIP-4844 proposal within Dencun.

How will Dencun change the crypto ecosystem? Grayscale analysts believe that the full implementation of the Dencun update is a prerequisite for Ethereum to become the most secure blockchain for decentralized applications (dapps). The rise in popularity of layer-2 blockchains is expected to increase competition as they try to attract users to their platforms. The report indicates that Ethereum has favorable network effects and liquidity benefits, making it attractive to new financial applications and developers.

Another advantage of Ethereum’s growth in layer-2 networks is its ability to attract new users to its ecosystem. According to Grayscale, Ethereum’s mainnet users remained relatively stable in 2023, while layer-2 networks like zkSync, Arbitrum, Optimism, and Base experienced consistent growth.

In parallel with the surge in Ethereum’s popularity, the market capitalization of various projects and altcoins related to layer-2 solutions for the Ethereum blockchain is also growing.

What do experts say about gas fees? Ansgar Dietrichs, a researcher at the Ethereum Foundation, explained in an interview that with the Dencun update, protocols on the network just need to be completed with everyone else using the same mechanism. The update will provide them with their designated space. However, according to a report by Max Wadington from Fidelity Investments, the fee reductions promised for layer-2 users will not directly impact users transacting on the Ethereum network. Philippe Schommers, the head of infrastructure at Gnosis, mentioned that the innovation behind the new “blob” transactions introduced by proto-danksharding shows progress in creating a more scalable Ethereum network.

The Dencun update also introduces changes to address the issue of data bloat. Previously, all data used by layer-2 networks was stored indefinitely on all Ethereum nodes. With the update, this new data type will be deleted after approximately two weeks, which helps combat the bloat of network resources.

Lower fees have been a much-anticipated expectation with the Dencun update. IntoTheBlock experts predicted that the cost of a DEX swap on various layer-2 solutions, including Arbitrum, Optimism, and Base, would decrease after the update. For example, Arbitrum was projected to experience a significant drop in gas costs, from $2.02 to $0.40.

Shortly after the update was launched, the Ethereum network experienced some turbulence, with the average Gwei size fluctuating between 32 Gwei to 115 Gwei. However, there was a small decline in fees observed on layer-2 chains. For instance, Starknet’s fee rate dropped by threefold.

Users noted that they observed changes in gas fees for layer-2 solutions shortly after the upgrade and hoped for a similar decrease in Ethereum fees. The day after the update, there was a noticeable improvement, with a desired reduction in Ethereum’s Gwei to 44. Additionally, there was a significant drop in fees for layer-2 networks, especially on the Optimism network.

While the Dencun update holds promise for improving Ethereum, developers are proceeding with caution due to the potential complexities and challenges that come with introducing new consensus mechanisms and making architectural changes. However, the update has already had a positive impact on Ethereum, with a significant reduction in fees and an increasing number of users and developers.