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Here's how this new upgrade changes Layer 2 networks

Here's how this new upgrade changes Layer 2 networks

The Dencun upgrade, especially the introduction of EIP-4844, will have a huge impact on the Ethereum network and especially the Layer 2 sector. The upgrade aims to significantly increase transactions per second (TPS), with a long-term goal of achieving scalability of over 100,000 TPS. This quantum leap in efficiency will be accompanied by a significant reduction in gas fees on Layer 2 networks such as Arbitrum and Optimism, which could fall by a factor of 10 once implemented.

This recalibration of cost structures promises to bring the second layer of Ethereum back to competitive levels with the fees of the first layer of blockchains such as BNB Chain, Avalanche, and Solana. This should not only enhance Ethereum's technological leadership, but also significantly improve the accessibility and economic viability of the network to a broader user base.

Current transaction costs on different Layer 2 networks. Source: IntoTheBlock

What does this mean for the Ethereum main chain?

The Dencun upgrade and introduction of EIP-4844 initially means a potential reduction in direct revenue from gas fees from Layer 2 networks of the Ethereum mainchain, as the upgrade significantly reduces the costs of using them. However, this change could stimulate the adoption and growth of L2 networks, which in turn leads to increased transaction volume and activity on them.

The share of fees paid by layer 2 networks to the ETH main chain. Source: Artemis

In the long term, this could lead to an increase in indirect revenue for the main chain, as a larger user base and larger transaction volume could lead to an increased need for interactions with the main chain. This would cement the Ethereum main chain as the central security and trust anchor for the entire Ethereum ecosystem. and enhancing their role in an increasingly diverse network of second language solutions.

What you should know about the layer 2 sector in Ethereum. What about digital currencies in general? You can find out in the new BTC-ECHO Ethereum report.

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