The Dencun update will take place this March 13 on blockchains linked to Ethereum. It will reduce transaction fees and could have an impact on the price of ether.

It’s not just the bitcoin halving that is agitating the crypto community at the moment. This Wednesday, March 13, an event called Dencun will take place, highly anticipated by Ethereum users. This is an update that follows on from the so-called “The Merge”, which moved Ethereum from Proof-of-Stake (PoS) to Proof-of-Work ( PoW).

Like many blockchains, Ethereum faces a trilemma: difficult to be decentralized, secure and “scalable” at the same time. A blockchain is said to be scalable “if it maintains a high level of performance when many people arrive on it at the same time,” explained Lilian Aliaga, journalist at Cryptoast, on BFM Crypto. However, Ethereum is not scalable today.

“Stunning costs”

“Like on a highway, when there is traffic, it takes longer to make the journey. The operations take longer, which means that the transaction fees on Ethereum are staggering,” points out the latter.

Today, transaction fees on Ethereum (to be found for example here) can be very high depending on the complexity of the operations carried out (simple transaction, making a swap, etc.). At the time of writing, performing a swap (that is, converting one ether into another on a decentralized exchange platform) costs around $75.

In this context, so-called “second layer” blockchains, built on Ethereum, have emerged. Users can carry out more transactions there, at reduced fees. For Ethereum, we can think of Arbitrum, Optimism and Polygon… while it is the Lightning Network for Bitcoin.

However, these blockchains store their data on Ethereum, which has a cost. This is where Dencun comes in: improving the way transaction data from second-layer solutions is stored.

“They will store their data in blocks, it will cost less and this data will be deleted after two weeks. This will make Ethereum lighter,” explains Lilian Aliaga.

Ether price

Two consequences are expected after Dencun. On the one hand, transaction fees within second-layer blockchains will be reduced. Some experts are talking about a division by 100 of transaction fees… which should attract more developers and users. Ethereum “will finally be accessible to all, even though it is an ecosystem that has long been shunned,” concludes the journalist.

Another expected consequence: an impact on the price of ether, as the crypto exceeded $4,000 on Monday. “If transaction fees really drop, then many uses and applications could become profitable or possible again,” Alexandre Stachchenko, independent expert on cryptocurrencies, explains to BFM Crypto.

“This should therefore increase the number of transactions, which could lead to an increase in demand for ether, and therefore in the price. But in my opinion, this is not the determining factor in the price of ether over the coming months” , he specifies. Response in the coming weeks.


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