TL;DR
- Significant Fee Reductions: The Dencun upgrade, scheduled for March 13, is expected to bring a 10-100x reduction in fees for users of Base, thanks to the implementation of EIP-4844.
- EIP-4844 Implementation: This upgrade introduces “blobs” to improve data availability on Ethereum, which will lower the costs for rollups to transmit data to Layer 1, benefiting end-users.
- Ethereum’s Expansion: The upgrade aims to attract more users to the Ethereum ecosystem by functioning as an efficient database for layer-2 blockchains, although it won’t directly reduce fees for base Ethereum blockchain transactions.
Ethereum’s Layer 2 scaling solution, Base, is poised to offer significant fee reductions for its users starting from the first day of the eagerly awaited Dencun upgrade slated for March 13. The upgrade, which incorporates the implementation of EIP-4844, is designed to improve data availability on the Ethereum network, potentially reducing fees for rollups like Base by a factor of 10 to 100.
Base recently announced its active participation in the EIP-4844 initiative over the past two years, collaborating with Optimism, the Ethereum Foundation, and other core development teams. The team expressed enthusiasm about the impending mainnet activation of the upgrade, which is projected to significantly impact transaction costs for Ethereum Layer 2 solutions.
EIP-4844 was initially proposed in 2022 by Protolambda from OP Labs and Ethereum researcher Dankrad Feist. The primary goal was to decrease the costs for rollups to transmit their data to Layer 1 (L1), thereby enabling them to pass these cost savings onto end-users. To accomplish this, EIP-4844 introduces an innovative concept called “blobs,” a new type of data associated with L1 blocks.
These blobs are intended to purely augment Ethereum’s existing data availability capacity. Importantly, the fee market for blobs operates independently from regular transactions, ensuring that their costs remain low even during periods of high L1 network congestion. Notably, L1 nodes can delete blobs after approximately 18 days, preventing data bloat and limiting additional storage requirements.
Ethereum’s TAM Expansion: Attracting a Wider User Base
Following the Dencun upgrade on March 13, the Ecotone OP Stack upgrade will activate on the Optimism Superchain ecosystem, extending the benefits of EIP-4844 to projects like Base, Mode, Zora, Aevo, and Fraxtal. Other Layer 2 projects, including Polygon, zkSync, and Arbitrum, have also expressed optimism about the potential fee reductions resulting from the Dencun upgrade.
The Dencun upgrade is the first step toward enabling Ethereum’s rollup-centric roadmap and will allow the network to function as a proper database for layer-2 blockchains to store data more efficiently and cheaply. The improvements are expected to attract substantially more users into the Ethereum ecosystem and should expand the network’s total addressable market (TAM).
However, the upgrade will not have any direct positive effects on Ethereum users because the fee reductions promised to layer 2 users will not affect those transacting on the base Ethereum blockchain. In the short term, users who wish to benefit from this fee change must sacrifice some decentralization and security by transacting on layer 2 instead of Ethereum.
