HTX Ventures: One Week After the Ethereum Dencun Upgrade
Singapore
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March 23, 2024 05:17 AM Eastern Daylight Time
Singapore / March 22, 2024 – The Ethereum network underwent a significant evolution with the implementation of the Dencun upgrade on March 13th, 2024. It is a great party for Ethereum rollups as Layer 2 costs drop significantly and open up vast opportunities. In this report, HTX Ventures examines the immediate impacts observed in the week following the upgrade, focusing on cost reduction, network performance, and the broader implications for the Ethereum ecosystem.
As stakeholders in Ethereum's growth, HTX Ventures is enthusiastic about the potential unlocked by these developments. The Dencun upgrade not only facilitates a more inclusive ecosystem but also paves the way for innovative and complex applications in gaming, SocialFi, DeFi, cross-chain interoperability, and more.
HTX Ventures, the global investment arm of HTX, leverages an integrated approach that combines investment, incubation, and research to identify the most exceptional and promising teams around the world. To date, HTX Ventures has supported over 200 projects spanning multiple blockchain tracks, with some high-quality projects already listed on HTX for trading.
In the chart, we can see the Ethereum market is hyped until the date of Dencun upgrade, March 13th, 2024. Source: Google Finance
Cost Reduction and Network Efficiency
EIP4844 Integration
The Dencun upgrade introduced EIP4844, which implemented data blobs—a development aimed at addressing Ethereum’s high fees and slow processing times. Although the full impact on cost reduction is yet to be completely realized due to the technical integrations into roll ups, the initial effects on Layer 2 gas fees indicate substantial improvements:
1.Significant Fee Reductions Across L2 Solutions:
The integration of data blobs led to notable decreases in transaction fees across various L2 platforms:
Changes in Average Transaction Fees: A 50%-99% decrease in median (Dated March 14th, Source: DuneAnalytics Dashboard)
Arbitrum : $0.39 -> $0.14
Base : $0.37 -> $0.03
Optimism : $0.32 -> $0.01
zksync : $0.19 -> $0.1
Zora : $0.2 -> $0.001
These reductions represent a decrease ranging from 50% to over 99% the day after Dencun upgrade, showcasing the upgrade’s immediate effectiveness in making transactions more affordable.
2.Cost of Posting data:
(Dated March 14th, Source: DuneAnalytics Dashboard)
Layer 2s shift to blob-based data posting has also led to an 88% reduction in data cost when posting data to ethereum, dropping the cost of posting data from a high of $400 per transaction to approximately $40 in the following week.
3. No Mainnet Gas Fee Reduction: Currently, the price of Ethereum gas has not been significantly affected. However, as adoption of the Blob API continues, reductions in Ethereum gas fees might be observed. This decrease in fees can be attributed to several factors, including the redirection of rollup demand to blobs, which frees up capacity for the Ethereum execution layer, and the separation of Ethereum gas fees and blob fees.
Source: https://ycharts.com/indicators/ethereum_average_gas_price
Future Outlook and Danksharding
Danksharding remains a pivotal element in Ethereum’s upgrade roadmap, promising further enhancements to network capacity and performance. Planned improvements include increasing the number of blobs per block and exploring advanced data availability (DA) solutions such as PeerDAS. Concurrently, research continues on MEV resistance, Verkle Trees, and network optimization efforts to make Ethereum a more efficient, user-friendly ecosystem.
Next Steps and HTX Ventures' Perspective
As stakeholders in Ethereum's growth, HTX Ventures is enthusiastic about the potential unlocked by these developments. The Dencun upgrade's focus on cost reduction, scalability, security, and usability not only facilitates a more inclusive ecosystem but also paves the way for innovative and complex applications in gaming, SocialFi, DeFi, cross-chain interoperability, and more.
Emerging Trends and Competitive Landscape
1. The return of application-specific chains to Ethereum, now reimagined as application-specific rollups, together with the emergence of new L2 and L3 solutions, signifies a significant shift within the Ethereum ecosystem.
2.Increased competition among L2 solutions underscores the importance of community engagement, infrastructure development, and a holistic approach to growth encompassing business development, sales, and marketing strategies.
Ethereum sidenote:
Separately, the introduction of Eigenlayer expands the ethereum ecosystem outreach to a vast number of protocols, introducing greater flexibility and diversity to the ethereum ecosystem to ensure a more agile ecosystem.
The pending approval of the ETH ETF, along with the SEC's decision on categorizing Ethereum, will have a significant impact on the asset's exposure in traditional markets. HTX Ventures is closely monitoring developments related to this event.
Conclusion:
HTX Ventures remains committed to supporting Ethereum’s journey, providing comprehensive assistance to projects that are at the forefront of decentralized data innovations. By fostering cutting-edge technologies, we aim to contribute to the long-term success and expansion of the Ethereum ecosystem.
Reference
Offchain lab twitter space: https://x.com/OffchainLabs/status/1768631403540091131?s=20
Tom Wan: https://x.com/tomwanhh/status/1768423766151905313?s=20
HTX ETH Dencun Upgrade Twitter space: https://twitter.com/i/spaces/1ZkKzjvanBZKv?s=20
https://www.google.com/finance/quote/ETH-USD?sa=X&ved=2ahUKEwiZqoz1wISFAxV7EGIAHUAbAB4Q-fUHegQIBxAf&window=YTD
About HTX Ventures
HTX Ventures, the global investment division of HTX, integrates investment, incubation, and research to identify the best and brightest teams worldwide.
With a decade-long history as an industry pioneer, HTX Ventures excels at identifying cutting-edge technologies and emerging business models within the sector. To foster growth within the blockchain ecosystem, we provide comprehensive support to projects, including financing, resources, and strategic advice.
HTX Ventures presently backs over 200 projects spanning multiple blockchain sectors, with select high-quality initiatives already trading on the HTX exchange. Furthermore, as one of the most vigorous Fund of Funds (FOF) investors, HTX Ventures collaboratively forges the blockchain ecosystem alongside premier global blockchain funds, including IVC, Shima, and Animoca.
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Michael Wang
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