After multiple postponements, can the Cancun upgrade promote the "return of the king" of ETH?

Author: Asher Zhang

On December 5, Ryan, the founder of Bankless, published a long article on the X platform, saying that “ETH has not yet entered a bull market”. As soon as this article came out, not only supporters followed, but also developers in the ecosystem such as Solana and BTC joined the debate. Ryan explained the fundamentals of ETH in a number of ways: high price-to-earnings ratios, deflation, POS does not consume energy and is therefore loved by ESG investors, and even believes that ETH has become the so-called “digital gold”. However, judging from the market reaction, it is difficult for these reasons to directly promote the sudden rise of the ETH market.

This paper argues that the engine of BTC and its ecological explosion is mainly BTC ETF and BTC inscription ecology, and the only thing that can be compared to ETH Fang is the “Dencun upgrade”, which is the main killer that can really attract market attention and funds and compete with the BTC ecology in this round of bull market. As the Dencun upgrade approaches, this article will focus on its core issues.

Why the Dencun upgrade is so important

Vitalik Buterin, the founder of ETH, has outlined the future of ETH Workshop 2.0 in six neat phases: The Merge, The Surge, The Scourge, The Verge, The Purge and The Splurge. Each phase revolves around a specific theme and feature upgrade. The Merge’s main achievement was to change the ETH from a PoW mechanism to a PoS mechanism, and with the success of this upgrade, many analysts in the market at the time believed that ETH Fang would rise more than BTC in the next bull market. However, with the birth of the BTC Ordinals protocol and others, BTC exploded. In contrast, the Dencun upgrade is almost as significant, essentially a very important part of The Surge’s phase.

The Surge was ultimately designed to solve the scalability problem that has plagued blockchain technology since its inception, eventually achieving a performance of 100,000 TPS, close to the speed of traditional electronic payments such as visa, and this upgrade was made possible by Danksharding (“DS”, i.e., sharding). Proto-Danksharding (EIP-4844) is the first step of Danksharding, an important step for Deneb-Cancun (i.e., the Cancun upgrade), and an important step for ETH to implement the sharding mechanism and complete the scaling roadmap. Note: Dencun is a compound of the words Cancun and Deneb. Cancun represents the execution layer upgrade of this ETH workshop, while Deneb represents the protocol layer upgrade.

Which tracks will be changed by the Decun upgrade

With the development of the crypto market, blockchain technology has gradually matured, and the Dencun upgrade is one of the main signs. As the technology matures, the crypto market will undoubtedly begin to move to the next stage of adoption, where the success of DeFi has already shown its strength. Right now, we’re at this important juncture. So, what tracks or fields are worth paying attention to after the upgrade of Dencun, and how did the connection between them come about?

Layer 2

The largest piece of the unit cost of Layer 2 transactions is “Call Data”, which currently accounts for more than 80% of L2 transaction fees, and the entire L2 chain can be rebuilt by using Call Data published on L1s in the event of malicious validator activity on L2s. One of the most important improvements to the ETH Dencun upgrade is EIP-4844. It introduces a new type of transaction called blob-carrying transactions, which are similar to regular transactions but contain an additional collection of data, called blobs, which are more economical than the current way of storing Calldata. In addition to the introduction of blob-carrying transactions, EIP-4844 will also implement other system changes such as execution layer logic, validation rules, and a multi-dimensional fee market to meet the need for full danks sharding in the future.

Modular Blockchain

Modular blockchains are blockchains that focus on handling a few responsibilities and outsourcing the rest to one or more independent layers. From the perspective of ETH Fang’s technological development, the development process of its modular technology stack mainly includes three stages:1. Monolithic blockchain: represents the L1 or main chain of ETH, which itself is a monolithic blockchain;2. Rollup: An L2 solution that acts as an execution layer, such as Arbitrum and Optimism, to move the execution layer out of ETH L1, publish state roots and rollup data and pass it back to L1 ETH;3. Modular rollups: Rollups with modular data availability.

In addition to Layer 2, in modular blockchains, the DA layer (data availability) is also worth paying attention to, which acts as an immutable bulletin board where transaction data and proofs are published. Without DA, Rollups can’t guarantee liveness. Using the transaction data provided by the DA layer, anyone can continue to calculate the next block from where the previous person left off, with the likes of Celestia and Avail being the leading projects in this field.

Full Chain Game

In the field of application, in addition to DeFi, chain games or the metaverse are the most noteworthy and may break the circle. And in the full-chain game, the most noteworthy is the DAW. DAWs (decentralized Autonomous Worlds) are a subset of omni-chain games, a genre of full-chain, open-ended, non-preset gameplay that further expands the game’s story by providing a publicly accessible programmable interface that allows players to freely create, enhance, and extend the game experience within the boundaries of digital physical reality. In October 2022, OPcraft, a fully chained 3D Minecraft-themed game created by the Lattice team in the Dark Forest, attracted a lot of attention from the market.

Layer 3

While there isn’t yet a widely accepted definition of the Layer 3 concept in the blockchain industry, it’s just as important. Vitalik Buterin, co-founder of ETH Workshop, believes that there are three possibilities for Layer 3 in the future: Layer 2 for scaling, Layer 3 for customization features such as privacy protection; Layer 2 is for general-purpose extensions, and Layer 3 is for custom extensions; Layer 2 is used for trustless extensions (Rollups) and Layer 3 is used for weak trust extensions (Validiums).

How do the big Vs in the crypto market see the future development of ETH

The Dencun upgrade is a very important upgrade for ETH Fang, but there are still different voices in the market, and this article collates the views of some crypto big Vs for readers’ reference.

According to Smarti Lab, contrary to popular belief, EIP-4844 alone is not enough for ETH to significantly improve scalability. We use two calculation methods to evaluate the potential reduction in gas fees, TPS (transactions per second), and the ability to accommodate rollups after implementing EIP-4844. It is estimated that EIP-4844 may hold more calldata, ranging from 38x to 192x, at calldata sizes of 10KB and 2KB, respectively. Since more calldata can be included in the same block, the cost per unit of calldata will be reduced accordingly. Assuming that the calldata size of each rollup is 2KB, EIP-4844 can only hold a maximum of 384 rollups. Under normal circumstances (i.e., when the block reaches the target size), ETH will reach 175 TPS through EIP-4844, up to a maximum of 350.

Former Solana core developer @zen_llama said, “I personally don’t agree with Rollups as a scaling solution, but they make a lot of sense as a value capture solution for ETH assets, which brings revenue to different networks, which is why I think Rollups are dangerous for ETH.” ”

@sassa l0 x, founder of The Daily Gwei, is optimistic: “ETH will soar above $10,000, leaving investors on the sidelines in a quagmire of fiat and shitcoins.” In my opinion, we still need to make it clear to people where the value of ETH is underpinned!"

Summary

The core developers of ETH Square have previously said that there will be no Dencun upgrade at the end of this year. On December 1, Christine Kim, vice president of research at Galaxy, posted that the Dencun upgrade had been #12上激活 on Devnet on November 30. Some analysts pointed out that the upgrade of Dencun is likely to be in the first quarter of next year. Judging from the time and current progress, it has a high probability in the first quarter of next year. IN ADDITION, ACCORDING TO DOCUMENTS DISCLOSED BY BLOOMBERG ANALYSTS, BLACKROCK (BLACKROCK) REGISTERED A ETH PLACE TRUST IN DELAWARE, AND THE REGISTERED ENTITY IS CALLED ISHARES ETHEREUM TRUST. This means that once the BTC ETF lands, then the ETH Fang ETF also has great hype expectations. On the whole, in 2024, the Dencun upgrade is most likely to be the engine for ETH Fang to return to the throne, and the ETH Fang ETF will be a booster to a large extent.