Polygon Outshines in Ethereum’s Dencun Upgrade: A Stepping Stone for Layer-2 Scalability

The Dencun upgrade, scheduled for March 13, 2024, marks a significant milestone for the Ethereum network. The Significance and importance breakdown of Ethereum Dencun can be explained as follows:

The recent Dencun upgrade on the Ethereum blockchain has triggered a mixed response from layer-2 cryptocurrency tokens. While some tokens dipped slightly, others, like Polygon’s MATIC, saw significant gains.

Here’s a breakdown of the key points:

• Ethereum’s Dencun Upgrade: This major upgrade aims to significantly reduce transaction costs on layer-2 networks built on top of Ethereum.
• Significant Rise Performance for Layer-2 Tokens: Following the Dencun upgrade, some layer-2 tokens, like Polygon’s MATIC and Arbitrum’s ARB, experienced price increases of 6–7% in the 24 hours leading up to the activation. However, some tokens, like Immutable X (IMX), declined slightly.
• MATIC’s Outperformance: MATIC’s gains were particularly noteworthy, potentially reflecting investor confidence in Polygon’s ability to benefit from the Dencun upgrade’s cost reduction features.

Polygon with Rise of Ethereum Duncun

Possible explanations for MATIC’s lead gains:

• Anticipation of Increased Adoption: The Dencun upgrade could make Polygon’s transactions even cheaper and faster, potentially attracting more users and developers to the platform.
• Strategic Positioning: Investors might see Polygon as a well-positioned layer-2 solution to capitalize on the growth of Ethereum and decentralized applications (dApps).

Overall, the Dencun upgrade is a significant development for the Ethereum ecosystem. While the short-term impact on layer-2 tokens is varied, MATIC’s strong performance suggests investor optimism about Polygon’s future prospects.

Additional points to consider:

• It’s important to monitor the long-term effects of the Dencun upgrade on both Ethereum and layer-2 solutions.
• Other factors beyond the Dencun upgrade could also be influencing MATIC’s price.

Ethereum’s Dencun upgrade enabled a new way of storing data that was forecast to dramatically cut costs for interacting with layer-2 networks

What is Dencun?

The Dencun Upgrade is a significant step towards making Ethereum more scalable , thus reducing transaction fee without compromising speed and security of the transactions. The Dencun is implemented by a technique called Proto-Danksharding (EIP-4844)

• A hard fork combining two upgrades:
• Cancun: Focuses on the Ethereum execution layer, improving transaction management and processing.
• Deneb: Targets the consensus layer, enhancing how network participants agree on the blockchain’s state.
• Introduces EIP-4844 (proto-danksharding), the key element.

Why is it important?

• Reduced Transaction Fees: EIP-4844 paves the way for lower fees on layer-2 scaling solutions, making transactions on Ethereum more affordable.
• Enhanced Scalability: This upgrade lays the groundwork for future improvements that will address Ethereum’s current limitations in handling a high volume of transactions.
• Increased Efficiency: Streamlines the overall blockchain operation.

EIP-4844 proposes a new type of transaction called Blob-Carrying transactions. These transactions can hold additional data chunks called blobs , which are temporarily stored on Ethereum Consensus Layer (Beacon Chain)

Storing data in Blobs is much cheaper than including it directly in main transaction data , thus enhancing overall scalability of Ethereum Chain.

EIP-4844 primarily benefits Rollups . Rollups can now use blobs to store transaction data temporarily on the Mainnet , thus reducing the amount of data that needs to be directly included in Rollup’s final submission to the main chain, resulting in lower transaction fee .

While,Ethereum is going through various upgradations trying to increase scalability, L2’s are still there to make Ethereum even more scalable. But, in my opinion, eventually Ethereum will become so scalable that it will become self sufficient, i.e no need for L2's

EIP-4844 is coming to Ethereum tomorrow. What does this mean for Polygon chains? Significance for Polygon :

1 EIP-4844 coming to zkEVM in May While 4844 goes live on Ethereum tomorrow, it will be coming to Polygon zkEVM testnet in April, and is estimated to go live on mainnet in early May, as part of the zkEVM Feijoa upgrade.

2.Transaction fees will be reduced by 2X — 5X Until it goes live, it will be hard to know exactly what the cost reductions are, but between a 2X to a 5X reduction in fees is estimated. This price reduction comes from the introduction of the blob storage in 4844. The zkEVM currently posts all transaction data back to Ethereum within calldata, which will change to use this new blob storage. Storing transaction data is currently responsible for ~80% of zkEVM fees. As this becomes cheaper to do with blob storage in 4844, so do transaction fees for users.

3.What about CDK / PoS chains? The Polygon PoS chain doesn’t benefit from 4844 as it’s not a rollup; and therefore doesn’t use Ethereum calldata to store transaction data. For Polygon CDK chains, support for 4844 will be included later this year, which will provide similar price reductions in chains that are using Ethereum calldata for DA. Any CDK chain that is using other DA solutions (including validium chains) already experiencing low transaction fees and won’t be affected by 4844.

Additional Points:

• Real-time monitoring: The upgrade is expected to occur on March 13, 2024, at 13:55:35 UTC. You can witness it live on platforms like Ethernow.xyz.
• Impact: While the immediate changes might be subtle, Dencun is a crucial step towards a more scalable and efficient Ethereum network.

Further Exploration:

• For a deeper understanding, explore resources like:
• https://twitter.com/Cointelegraph/status/1767227616380002721
• https://www.tradingview.com/news/newsbtc:294588e0c094b:0-dencun-upgrade-officially-deployed-on-ethereum-mainnet-eth-price-holds-steady-below-4-000/

Conclusion: The crypto space is constantly evolving. Staying informed about significant upgrades like Dencun is essential for anyone involved with Ethereum and its ecosystem.