Ethereum’s Danken upgrade to Layer 2 blockchains is expected to dramatically lower costs.

Using the world’s most commercially successful Blockchain The ecosystem is going to be much cheaper after the latest software upgrade. Ethereum Network

Referenced by developers. DanconThe March 13 update is expected to dramatically lower the costs of so-called Layer 2 networks — the dozens of chains like Arbitrum, Polygon and Coinbase Global’s Base that connect to Ethereum. A transaction that used to cost $1 to post may now cost a cent. Another that was worth a cent will now be a fraction of a cent.

The upgrade is being hailed as the most significant change to the end-user experience of the Ethereum ecosystem to date – and will be far more noticeable to users than the famous September 2022 merge, which made Ethereum dramatically reduced energy consumption. Ethereum handles more transactions than the Bitcoin network.

“It’s going to overshadow all of them,” said Roberto Biardo, an engineer working on Coinbase’s base. “Integration was very important and very important, but users didn’t pay much attention. From the end user’s perspective, this change is going to be very dramatic and drive a lot of innovation on the application side.”

With Dencun — a combination of the “Deneb” and “Cancun” parts of the update — Ethereum will introduce a new data storage system. Currently, most layer 2 blockchains store data on Ethereum. Because this data is stored forever, on each Ethereum node, that storage often adds up to about 90 percent of the cost of Layer 2s, which they typically pass on to applications, and they in turn charge users. Charge. With Dencun, Layer 2s will be able to store their data in a new type of storage called blobs. Blobs will be cheaper because data will only be stored in the warehouse for 18 days.

As blobs gain traction, more space will be left on Ethereum for other transactions, so the network should shut down less frequently. On the other hand, it will no longer keep a complete record of everything forever.

“You get nothing for nothing, but I think it’s a great trade-off for Ethereum,” said Ed Felton, a retired Princeton University professor who co-founded Orbitrum. Co-founded China Labs.

Felton said the change could boost the use of artificial intelligence in games, where non-player characters would now be able to exhibit sophisticated AI model-driven behaviors — which were previously prohibitively expensive. In decentralized finance, where users can trade and borrow directly from each other, automated market makers can also begin to embed complex, AI-powered trading strategies.

“In general it allows for more complex and sophisticated behavior from applications than is possible today,” Felton said.

This upgrade may encourage the release of more Layer 2 chains, which can now be operated much more cheaply. Where a Tier 2 project previously needed to secure millions of dollars in venture capital backing to get up and running, it may now be able to accomplish the same feat with a skeleton crew. Jim MacDonald, co-founder of Attest, which helps run the Ethereum network, said it could be cost-effective to launch new Layer 2 chains for a single day for a single vote. A stream can be created for a purpose such as issuing tickets for a single event.

“What we’ll actually see is a real explosion of layer 2 chains,” McDonald said. “I would certainly expect to see hundreds of L2s in 18 months next year. They don’t necessarily live that long.”

It can take several hours for layer 2 chains to start using blobs. For example, Arbitrum expects to move to Blobs “within a day or two” after the upgrade, Felton said, because the change needs to be discussed and voted on through Arbitrum’s decentralized governance system. Meanwhile, chains can still use Ethereum’s traditional transaction setup.

The price of blobs will rise over time, as demand for them increases, so the cost advantage may eventually disappear.

“Eventually the fees will go up again,” said Carl Floresch, co-founder of the Optimism Project, whose technology is used in many Layer 2 chains like Base. “Based on some rough analysis, it would be several months. Would it be several years? I would say absolutely not.”

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