Ethereum Plummets 7% As Dencun Upgrade Activates: Analysis & Outlook

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March 15, 2024 by Mishal Ali

The highly anticipated launch of the Dencun upgrade for Ethereum finally occurred on March 13. This led to a drop in price by 7% from $4,082 to $3,656 as per CoinMarketCap data. However, during these periods of time, Ethereum was not operating under the same network conditions when it had croosed above $4,000 in late 2021.

CoinMarketcap

In particular, network congestion per transaction has been reduced to less than one-sixth of what it used to be. This reduced strain is due in part to better fee dynamics that came with the Ethereum 2.0 transition, causing average gas fees to stand at a relatively low $9.35. In history, Ether’s increased adoption over longer periods and thriving use cases have always been maintained by keeping lower charges and relieving network blockages.

🤑 Unlike the previous time that #Ethereum crossed above a $4K market value (October & November, 2021), the network is less than 1/6th as cheap per transaction today. With gas fees at a modest $9.35 in gas fees, on average, this can be partly attributed to the improved network… pic.twitter.com/bXWmmrqX3L

— Santiment (@santimentfeed) March 14, 2024

The Ethereum Foundation’s 183rd All Core Devs Execution Layer (ACDE) meeting provided an encouraging post-mortem on the Dencun rollout. “The fork went extremely smoothly. No major issues were observed,” the core devs stated, despite node participation rates temporarily dropping from 99% to 95%, likely due to some node operators failing to perform the necessary upgrades promptly.

Dencun represented “the most complex fork shipped since the Merge” in terms of making sweeping systemic changes. It also matched the Byzantium fork by including the highest total number of approved Ethereum Improvement Proposals (EIPs) enacted in a single upgrade event.

Ethereum’s Latest Upgrade Hits its Stride

Tim Beiko, a key figure in the Ethereum developer community, commented on Dencun’s effect on X (Twitter). He noted that even as anticipated, “blob” transaction data handling did not result in delayed block propagation times—although there was a slight rise from 13-14 chain reorganizations/day pre-fork to 17-18 post-launch.

However, these re-orgs did not exhibit abnormal depth beyond the common single-block variety. Regarding the blob transactions’ fee market dynamics, Beiko observed that activity has yet to outpace the base fee levels, so the true long-term fee equilibrium remains uncertain. Overall, he hailed Dencun as “an extremely smooth conclusion to 2+ years of implementation work” and extended a “huge congrats” to all teams whose efforts made it possible.

Looking ahead, the next steps involve marking the Dencun EIPs as “Final” and initiating the official retirement of the Goerli test network within the next month, although most validators had already stopped utilizing it organically.

Then the discussion turns to prioritize proposals for Pectra hard fork, such as BLS signature precompiles, adjusting CALLDATA gas costs for blob transactions, aliasing ORIGIN as SENDER for security purposes and many others. Nonetheless, no final decisions about Pectra’s scope and timeline have been agreed upon since developers want to spend weeks evaluating the highest-impact additions before they finalize plans.

Next up, we discussed EIP-7645, which proposes to alias ORIGIN to SENDER. The rationale for this one is that using ORIGIN is generally discouraged and aliasing it to SENDER would be more secure and forward compatible with several account abstraction proposals.

— timbeiko.eth ☀️ (@TimBeiko) March 14, 2024

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