Ethereum Dencun Upgrade Before Last Round of Tests – What Changes with ETH?

Ethereum (ETH) is awaiting its next major upgrade, known as Dencun. It will be uploaded to a final testnet on Wednesday. Dencun is intended to fundamentally improve Ethereum, here are the details.

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It has become common practice for Ethereum (ETH) to have a major technological upgrade go live about once a year

The number two cryptocurrencies demonstrates continuous development and responds to challenges facing the Ethereum ecosystem. The upcoming ETH upgrade Dencun (also known as Cancun) has been working on since summer 2023 and the schedule for activation has recently become more specific, according to developer Tim Beiko . The upgrade Dencun is scheduled to be uploaded to the Ethereum testnet Holesky on Wednesday (February 7th) as the last test round before the mainnet.

Two problem areas are particularly pressing with Ethereum and both are intended to be addressed by the Dencun upgrade: scalability and transaction costs. “Proto-Danksharding” is what the ETH developers call a concept that integrates Layer-2 solutions more deeply into Ethereum.

For years, many Ethereum projects have been switching to Polygon (MATIC), Arbitrum (ARB) and other Layer-2 in order to have transactions and smart contracts validated there. Only the final results collected are then irrevocably documented in the actual Ethereum blockchain. This method can significantly save transaction fees and bypass the low capacity (around 20 transactions per second) of the Ethereum blockchain.

Dencun with “Proto-Danksharding” will now officially promote Layer-2 solutions for Ethereum. In the future, the Ethereum ecosystem should be able to handle more than 100,000 transactions per second through the interaction of Layer 1 and Layer 2. “Blobs” are an innovative idea. They are used to create data packages temporarily and offline and delete them after confirmation. This will reduce the storage pressure on Ethereum and this should also reduce transaction fees. The aim here is to reach levels of Ethereum competitors such as Solana (SOL) .

Conclusion: Upgrade Dencun could affect Ethereum price curve

The upgrade Dencun is scheduled to be activated on the Ethereum mainnet in March. Ahead of other major upgrades in Ethereum, momentum was seen on ETH’s price curve.

Ultimately, Ethereum is always about keeping the ecosystem attractive for crypto projects from areas such as decentralized finance (DeFi) or blockchain gaming. Transaction fees and processing time play crucial roles. If Upgrade Dencun works as planned, Ethereum would have solved two important tasks using Layer-2 solutions, at least for the time being.

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(Featured image by Zoltan Tasi via Unsplash)

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