Ethereum’s long-anticipated Dencun upgrade finally has a date and it’s fast approaching, set for March 13th. The upgrade will improve the performance of existing L2s, of which there is an increasing number as more new chains like Mode network, Blast, Fraxtal, and more throw their name into the rollup bucket.
Dencun, combined with the current hype around restaking as well as the potential for an $ETH ETF serve as interesting catalysts for an Ethereum. The coin, which has been a bit of a laggard this cycle, recently crossed above the $3k threshold, up ~8% this past week whilst $BTC is more or less flat.
Stay alert, stay informed ⬇️
Dencun Impact on Restaking
Dencun is set to go live on the Ethereum mainnet on March 13th, significant for Ethereum, $ETH, and the networks and tokens associated therewith. The upgrade consists of 9 EIPs (Ethereum Improvement Proposals); the most significant of which is actually EIP 4844.
EIP 4788 aims to replace custom oracles for liquid staking solutions, reducing complexity and risks. This upgrade aims to lower the trust assumptions of staking pools, and restaking arrangements. EIP 4788’s importance also shouldn’t be underestimated as it pertains to liquid staking and restaking, both of which have become more important and now hold more weight on the Ethereum network compared to when Ethereum Dencun was first introduced. The EIP affects things at the user application level compared to other aspects of the greater Dencun upgrade which introduce some minor technical fixes.
In its current state, the landscape of user applications on Ethereum is in a bit of a pickle as more dApps opt for deployments on L2s, especially as fees rise on mainnet. Nonetheless, numerous dApps have done multiples in their Ethereum mainnet TVL by introducing restaking and LRT products. This includes liquid restaking services, leveraged restaking, restaking point accumulation via yield trading, lending of LRTs, and more. While LSTs were the dominant narrative in a more bearish past, attention has clearly shifted towards the restaking of assets.
EIP 4788 embeds beacon block roots into the EVM by storing roots on Ethereum mainnet as well as a smart contract. Basically, the impact that this can have is that EIP-4788 could help to enhance the security, trustworthiness, and efficiency of restaking. Liquid staking also stands to gain as the need for LST providers to rely on oracle networks will be eliminated.
Impact of EIP 4844
EIP 4844, which is definitely the more-talked-about aspect of Dencun, introduces data blobs laying the foundation for sharding in the future, potentially benefiting layer-2 performance. Of course, this event, or even its anticipation, can have significant impacts on the price of $ETH as well as associated L2 tickers. EIP-4844 AKA the Proto-Danksharding upgrade, will mark a significant reduction in the operational costs associated with rollups. Specifically, EIP-4844 paves the way for a seamless transition of the Ethereum protocol architecture to accommodate future Danksharding implementations. Some notable pros include lower fees for rollups, blob-carrying transactions, as well as being forwards compatible.
Forwards compatibility refers to the ability of a system to work with future upgrades, which is crucial for something like Ethereum which is still subject to development and changes in the future.
Monday at 12 PM EST, we’ll be hosting our 3rd episode of Revelo Roundtable. We’ll be discussing the stablecoin space with a guest panel including Ethena, Mountain Protocol, Liquity, and Gyroscope… See you there!
Blobs (Binary Large Objects) basically are just chunks of data linked to transactions, which are different from typical transactions. The benefit is that they are stored on the Beacon chain and are subject to much lower gas fees. A 10x increase in stored data per block will soon be possible with blobs. Blobs are stored separately from other distinct data.
Blobs aim to lower Data Availability (DA) costs, a serious point of contention as services like EigenDA and Celestia have sprung up in recent months. Blobs may be able to lower L2 gas costs up to 90%, as previously, 90% of L2 gas fees were comprised of a Ethereum mainnet publishing fee, which will now be replaced by a dynamic pricing model which fluctuates based on blob supply and demand.
As it relates to the Dencun upgrade, there have also been conversations about making small changes at the validator and node client levels to enhance block space. Justin Drake and Vitalik support the idea, indicating a good foundation for success.
Important Links
Become a Premium member to unlock all our research & reports including access to our members-only discord server
Join thousands of sharp crypto investors & traders by becoming a Premium Member & gain an edge in the markets. For just $116.58/month you’ll get:
Premium access to the entire Revelo Intel platform
Market Intel - actionable investment reports
Industry Intel - highlighting important narratives/ trends
Sector Overviews - 90-day Reports with data and insights on key sectors
Launch Alpha - Weekly report highlighting new projects
Airdrop Guides - Reports on airdrop opportunities
Members Only Discord server
Project Snapshots - Monthly protocol-specific performance reports
Project Breakdowns & Timelines - Deep dive 50+ page protocol-specific reports
Notes - Summaries of your favorite podcasts & AMAs