Getting Cheaper, Getting Higher? Ethereum Dencun Upgrade And The Potential For ETH To Rise Back Above $4,000
12 Marzo 2024 - 5:00PM
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The highly anticipated Dencun upgrade for the Ethereum (ETH)
ecosystem is on the horizon, promising to bring significant cost
reductions and notable changes to Layer 2 (L2) networks. The
update, scheduled for March 13, will introduce a new data storage
system known as blobs, reducing congestion on the Ethereum network
and driving key new features in various areas. Ethereum
Dencun Upgrade As highlighted in a recent Bloomberg report, Dencun
aims to reduce the cost of Layer 2 networks such as Arbitrum (ABR),
Polygon (MATIC), and Coinbase’s Base by enabling previously costly
transactions to become significantly cheaper. In particular,
transactions that used to cost $1 can now cost as little as one
cent, the report notes, while others that used to cost cents can be
reduced to a fraction of a cent. This cost reduction is expected to
improve the end-user experience greatly and is a significant
improvement over previous upgrades such as the September 2022
“Merge.” Related Reading: Solana Demand Soars As Institutions Buy
Up SOL At A Massive 870% Premium One of the most crucial aspects of
the Dencun upgrade is the introduction of blobs, a new type of data
repository for Layer 2 networks. Currently, Layer 2 blockchains
store their data on the Ethereum network, leading to substantial
storage costs passed on to applications and users. However,
with blobs, Layer 2s will store their data for a significantly
shorter period, about 18 days, resulting in lower costs. While this
shift sacrifices storing a complete record of all transactions
forever, it frees up more space on the Ethereum network for other
transactions, reducing congestion. AI-Driven Trading Strategies
According to the report, introducing blobs through the Dencun
upgrade also paves the way for using artificial intelligence (AI)
in various applications. For example, games can incorporate
AI-driven non-player characters, enabling advanced gameplay
capabilities and a deeper experience. In decentralized
finance (DeFi), automated market makers can incorporate “complex
trading strategies” driven by AI models. This newfound flexibility
and complexity are expected to foster innovation and drive the
development of advanced applications in the Ethereum ecosystem. In
addition, the Dencun upgrade is expected to reduce the operating
costs of Layer 2 chains significantly. Previously, launching and
operating a Layer 2 project required considerable venture capital
backing. However, Bloomberg reports that with the cost reductions
brought about by Dencun, small teams may be able to launch and
maintain Layer 2 chains. While the adoption of blobs and the
associated cost advantages are expected to drive immediate
benefits, it is worth noting that the cost of blobs may increase
over time as demand grows. How Could Dencun Boost ETH Price?
While the price of ETH has corrected by over 3% in the past 24
hours, resulting in a current trading price of $3,916, the Dencun
upgrade holds the potential to have a positive impact on its price.
The upgrade aims to significantly reduce costs for Layer 2 networks
and enhance the overall user experience, making Ethereum a more
appealing platform for decentralized applications (dApps) and other
use cases. By lowering transaction fees and improving scalability,
Dencun could attract more users and developers to the Ethereum
ecosystem, potentially driving up demand for ETH tokens. Related
Reading: Expect A Bitcoin Scarcity Crisis In 6 Months, BTC To
$100,000? Despite the ongoing correction, it is worth noting that
the current price of ETH is not far from its two-year high of
$4,084. However, it’s important to consider that the price has
formed a double top pattern on the daily time frame for two
consecutive days, which may present a near-term hurdle for ETH’s
price. The market’s reaction and the ability of ETH to surpass its
nearest resistance level remain to be seen. Featured image from
Shutterstock, chart from TradingView.com
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