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.”
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…
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