How will the Ethereum Dencun upgrade impact L2s and gas fees?
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How will the Ethereum Dencun upgrade impact L2s and gas fees?
The Dencun upgrade represents Ethereum's shift toward a Layer 2-centric scaling approach.
Navigating Web3 tides with focused insightsAuthor: Ebunker
The Ethereum Dencun upgrade is scheduled for March 13, and discussions about how it will impact Layer 2 (L2) networks and gas fees continue to intensify. The Dencun upgrade is expected to reshape the future of the Ethereum blockchain, with developers viewing it as a major milestone—especially for Ethereum’s L2 ecosystems.
The centerpiece of the Dencun upgrade is EIP-4844, also known as “proto-danksharding,” which introduces a new type of transaction that reduces rollup costs by adding data blobs. These blobs occupy a separate space within transactions, allowing rollup networks or other protocols to temporarily store data on them. As a result, the cost for L2 networks to store data on Ethereum will significantly decrease—and these savings are expected to be passed directly to users. So, how exactly will the Dencun upgrade affect L2s?
How Will the Dencun Upgrade Impact L2s?
Arbitrum: Offchain Labs, the developer behind the L2 optimistic rollup network Arbitrum, believes the Dencun upgrade will reveal some interesting dynamics, particularly in lowering L1 fees. According to Steven Goldfeder, co-founder of Offchain Labs, certain operations consume large amounts of data on L1 but almost none on L2, while others rely heavily on L2 data usage. Each ecosystem will thus independently determine how to price and manage data across L1 and L2. Some competitors offer free L2 fees, but such models are difficult to sustain long-term.
StarkWare: Starkware, the primary developer behind the L2 network Starknet, has been preparing its infrastructure for the launch of proto-danksharding. Eli Ben-Sasson, CEO of Starkware, believes blob usage will drop dramatically—but this depends on blob pricing. If current data is moved into blobs at one-tenth the current price, costs could fall by 90%.
Base: Jesse Pollak, Head of Protocol at Coinbase and creator of L2 Base, estimates that the blob space opened by proto-danksharding will be about four times larger than what current Ethereum rollups use. At this level of supply, transaction costs will become very low since pricing follows market dynamics. If usage doesn’t spike immediately, costs could drop by 90% to 95%. However, lower costs may drive higher adoption, eventually reaching an equilibrium where fees settle at 2x to 5x lower than today. A 2x reduction would bring per-transaction costs down to around 10–15 cents, while a 5x drop would make them under 5 cents.
Polygon: Jordi Baylina, co-founder of Polygon, stated at ETHDenver that fee reductions are primarily a matter of supply and demand—increased supply enhances Ethereum's data availability, though the exact extent of cost declines remains hard to predict. Brendan Farmer, another co-founder of Polygon, added that ZK rollups differ from optimistic rollups: optimistic rollups must pay for data availability during their 7-day challenge period, whereas ZK rollups have minimal associated costs.
What Impact Will the Upgrade Have on Gas Fees?
According to experts like Karl Floersch, CEO of OP Labs, the Dencun upgrade marks the dawn of a new era for Ethereum. It’s seen as a crucial step toward improving user experience and scalability, addressing long-standing issues around gas fees and network congestion.
L2 developers anticipate that the Dencun upgrade will lead to significant reductions in gas fees, making transactions on scaling networks cheaper and easier to verify. David Silverman, VP of Product at Polygon Labs, believes users can expect substantial gas savings once settlement contracts are updated across all L2 networks. Polygon Labs aims to ensure its users benefit directly from these cost reductions.
Terence Tsao, a developer at Offchain Labs, estimates that assuming current network traffic levels, L2 gas fees could drop immediately by up to 75% following the Dencun upgrade. This is due to the introduction of “blobs” and proto-danksharding, which provide a more cost-effective method of data storage on Ethereum. Proto-danksharding allows L2 data to be stored temporarily for about one month, drastically cutting storage costs without compromising security. This enhancement has been likened to expanding Ethereum into a four-lane highway—with potential for further expansion in the future.
0xTodd, partner at Ebunker—a well-known non-custodial Ethereum staking service—stated that the most important outcome of the Cancun upgrade is the dramatic reduction in L2 gas fees, giving Ethereum-based L2s a competitive edge against other Layer 1 blockchains. Additionally, since L2 sequencers are among the largest consumers of gas on Ethereum mainnet, the upgrade is also expected to result in a slight decrease in mainnet gas fees.
Transforming Transaction Efficiency and Cost
The anticipated drop in gas fees could have far-reaching implications—users might not need to pay gas fees at all in the future. David Silverman from Polygon Labs envisions a gas abstraction model similar to how Web2 giants absorb costs for services like video conferencing and email to attract users.
While the vision of gas-free transactions mainly applies to L2 networks, Ethereum mainnet will continue playing a critical role in ensuring data security and enabling cross-network communication. Nevertheless, most on-chain activities—including NFT purchases and other retail transactions—are expected to permanently migrate to L2s.
Terence Tsao from Offchain Labs believes the Dencun upgrade will fundamentally change how users interact with Ethereum, pushing the mainnet further into the background. This shift will eliminate the high costs traditionally associated with on-chain transactions, making activities like NFT minting more accessible and affordable.
Karl Floersch, CEO of OP Labs, anticipates that removing barriers to integrating on-chain elements will foster cross-chain growth across various platforms and media. For example, he imagines video games that generate NFTs interacting seamlessly with DeFi protocols and leveraging social media presence—all at minimal cost.
The Upgrade Shifts Ethereum Toward a Rollup-Centric Model
The Dencun upgrade also signifies Ethereum’s transition toward a rollup-centric scaling strategy. Ethereum aims to slow changes to its core components, shifting innovation and user-facing development to L2s. Unlike base chains responsible for scaling, rollups are likely to define the future. Major rollup teams have already begun coordinating at L2 conferences to discuss improvements and proposals. Changes to the EVM—such as new forms of account abstraction, precompiles, and opcodes—will no longer be implemented directly on Ethereum mainnet. With the rollout of EIP-4844, the ecosystem will begin to see the real impact of proto-danksharding. Notably, as more L2s adopt blob space, the marginal cost-saving benefits will gradually diminish.
Summary
With the Dencun upgrade set to dramatically reduce gas fees and enhance key functionalities, Ethereum is poised to enter a new era of scalable and low-cost on-chain transactions. The upgrade will further accelerate innovation and adoption across L2 networks, fundamentally transforming how users engage with the Ethereum ecosystem.
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