Ethereum’s landmark Dencun upgrade, due next week, is expected to result in lower costs for layer 2 blockchains to store data on the main blockchain – a reduction that will likely be passed on to users of the auxiliary networks in the form of lower costs.
CoinDesk spoke to Polygon’s Jordi Baylina, Arbitrum’s Steven Goldfeder, StarkWare’s Eli Ben-Sasson, and Base’s Jesse Pollak to get their predictions on the impact.
Ethereum developers are gearing up for the blockchain’s next major upgrade next week. called Dencun.
It should usher in a new era of lower fees for ‘layer 2’ blockchains, including so-called rollup networks that aim to offer faster and cheaper transactions than on the main blockchain. But how much lower?
Dencun will be the biggest upgrade – technically a “hard fork” in blockchain jargon – the network will undergo in almost a year.
The main ingredient in Dencun is called EIP-4844, or more commonly “proto-danksharding,” which will introduce a new type of transaction class that reduces the cost of publishing transaction data rollups, through the introduction of data ‘blobs’. These blobs provide a separate place in a transaction where collapsed networks or other protocols can temporarily store data – sometimes described as a ‘sidecar” that takes up no space in the main car.
As a result of more blobs, the cost for these layer 2 networks to store data on Ethereum will be significantly cheaper, and the reduction will likely trickle down to users in the form of lower costs.
But how exactly it will all work out is still unclear, according to many Ethereum experts. We asked leading layer 2 teams, including Polygon, Arbitrum, StarkWare, and Coinbase’s Base, for their predictions after Dencun.
Polygon
Polygon co-founder Jordi Baylina told CoinDesk in an interview on the ETHDenver conference last week in Colorado that “prices must fall mainly because it is a matter of supply and demand. Your supply is greater, the availability of data on Ethereum is increasing, so the price should become lower.”
“By how much? We don’t know, it’s hard to predict,” Baylina said. He said he welcomes the upgrade as an important first step in the roadmap laid out by Vitalik Buterin, which focuses on moving activities to rollups to scale the blockchain.
Brendan Farmer, another co-founder of Polygon, added that there will be different benefits for zero-knowledge (ZK) rollups and optimistic rollups – the two main types. For optimistic rollups, “you have to pay to prove data within the seven-day delay, but for ZK rollups these costs are very, very low,” Farmer added.
(Polygon’s latest technology, one might infer, relies on the ZK rollup.)
Arbitration
Steven Goldfeder, the co-founder of Offchain Labs, the developer agency behind the layer-2 network Arbitrum (an optimistic roll-up), said Dencun “will expose something very, very interesting, which has been kind of background for a few years and what that is, it helps an L1 fee,” Goldfeder told CoinDesk at ETHDenver.
“We also pay for layer 2 and if you think about it, the reason why there are certain operations that use a lot of data on layer 1 and nothing on layer 2, and there are certain operations that use them basically like nothing. on layer 1, then they just use a lot of layer 2,” Goldfeder added.
Each ecosystem decides for itself how to handle pricing and data at a tier 1 versus a tier 2. “Some of our competitors price tier 2 fees at virtually zero. And that is not sustainable,” says Goldfeder.
“If you price gas at zero, someone can simply use the network for free and continue to do so for free. And I think this will be very much at the forefront.”
StarkWare
Eli Ben-Sasson, CEO of StarkWare, said the blobs will decrease significantly, but that will depend on the prices of the blobs filling up. Ben-Sasson told CoinDesk that “90% of the fees that users pay for transactions are related to the cost of data at layer 1. So it means that if this data is now added in blobs, and let’s say the price is 10x is lower, then 90% of the costs are reduced by a factor of 10.”
StarkWare is the key developer behind the layer-2 network Starknet, and the team has been working behind the scenes to prepare Starknet’s infrastructure for proto-dankhardening once it goes live. “You would always want to be ready on the first day. I’m glad we succeeded. It wasn’t clear that we could do that, but we kind of rushed through it.”
Base
In an interview last week with CoinDesk’s The Protocol podcast, Jesse Pollak, head of protocols at Coinbase and creator of the Base Layer-2 network, broke it down.
He estimated that the blob space opened up by proto-dankhardening will be roughly four times larger than what Ethereum rollups currently use. At that level of demand, transactions would be “very cheap” because the fees are market-based, said Pollak, who oversees the development of the U.S. crypto exchange’s layer-2 blockchain. Without an increase in usage, costs could fall by 90% to 95%.
But he said it is likely that the low costs could lead to higher usage, and that “as demand picks up again, there will be a stable equilibrium,” and that costs could ultimately be two to five times lower than they are today.
A two-fold reduction would imply a cost per transaction of around 10 to 15 cents, while a five-fold drop would bring the figure below 5 cents, he said. Coinbase’s own goal is to see “sub-cent” transaction fees, he said.
Due to the market mechanism for setting fees, it is “impossible to predict exactly,” Pollak said.
Read more: Ethereum developers are targeting March 13 for milestone ‘Dencun’ upgrade on MainnetBradley Keoun contributed reporting.