Ethereum Dencun Upgrade: What’s Next for Gas Fees and Layer 2?
The Ethereum network continues to evolve, and its most recent leap forward is the Dencun upgrade. Officially activated in March 2024, this hard fork marks a significant technical milestone for Ethereum, with wide-reaching implications for gas fees, scalability, and the Layer 2 ecosystem. But what exactly does the Dencun upgrade do—and how does it shape the future of Ethereum?
In this article, we’ll break down the key features of Dencun, explore how it impacts transaction costs, and analyze what’s coming next for Layer 2 solutions like Arbitrum, Optimism, Base, and zkSync.
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What Is the Dencun Upgrade?
Dencun is a combination of two proposals—“Deneb” and “Cancun”—hence the name. It’s a hard fork that introduces a set of Ethereum Improvement Proposals (EIPs), with the most notable being EIP-4844, also known as proto-danksharding.
The purpose of Dencun is to:
• Improve Ethereum’s data availability
• Reduce Layer 2 transaction fees
• Prepare the network for full danksharding, which is the long-term scalability solution for Ethereum
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EIP-4844 and Proto-Danksharding Explained
At the heart of Dencun is EIP-4844 (Proto-Danksharding). This is a major milestone on the path to full sharding and introduces a new type of data called “blobs”.
Here’s what proto-danksharding achieves:
• Blobs are a cheaper way to store temporary data off-chain
• Layer 2 rollups (like Optimism or Arbitrum) can post large amounts of transaction data in these blobs, drastically reducing costs
• These blobs do not stay on Ethereum forever—they are pruned after about 2 weeks, optimizing storage
In essence, EIP-4844 makes it significantly cheaper for rollups to operate, leading to lower user fees.
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Impact on Gas Fees
Before Dencun, even Layer 2 rollups like Optimism or Arbitrum had relatively high transaction fees due to the cost of publishing data on Layer 1. After the Dencun upgrade, average gas fees on major Layer 2s have dropped by 5x to 10x.
Here’s a quick comparison:
| Layer 2 | Avg Tx Fee (Before Dencun) | Avg Tx Fee (After Dencun) |
| Arbitrum | $0.40 – $0.70 | $0.05 – $0.10 |
| Optimism | $0.30 – $0.60 | $0.03 – $0.08 |
| Base | $0.25 – $0.50 | $0.01 – $0.05 |
| zkSync Era | $0.50 – $1.00 | $0.04 – $0.10 |
This drop in fees is significant. For example, users can now trade on decentralized exchanges (DEXs) or mint NFTs on Layer 2 with almost negligible costs.
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Boost for Layer 2 Ecosystem
The Dencun upgrade is a major win for Layer 2s, which are now better positioned to handle mass adoption. Here’s how Layer 2 networks benefit:
1. Cheaper and Faster Transactions
With blob-based data posting, Layer 2s can offer even more competitive fees and faster confirmation times, further reducing the need to transact directly on Layer 1.
2. More Use Cases
Lower fees open the door for new applications such as micro-payments, gaming, on-chain social media (e.g., Farcaster), and consumer-level dApps.
3. Improved UX for DEXs and Bridges
With cheaper data availability, Layer 2 DEXs can support higher trading volumes and better liquidity without driving up costs.
4. Composability Between Rollups
Some L2s like Optimism and Base are moving toward a shared framework using OP Stack, which allows for easier interoperability between chains. Dencun further accelerates this vision by making cross-rollup data access more efficient.
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Challenges and Limitations
Despite the success, Dencun isn’t the final answer to Ethereum’s scalability:
• Blobspace is limited: The network currently allows a limited number of blobs per block. If demand increases rapidly, fees could rise again.
• Not yet full sharding: Proto-danksharding is a transitional solution. Full danksharding—expected in a couple of years—will unlock massive scalability, but it’s still under development.
• Rollup centralization: Many rollups still rely on centralized sequencers. Cheaper fees don’t solve the need for decentralizing these operators.
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What’s Next After Dencun?
Now that Dencun is live, the Ethereum roadmap moves toward:
1. Full Danksharding
Danksharding will eventually allow Ethereum to support thousands of transactions per second by further expanding data availability and implementing blob markets.
2. Verkle Trees (EIP-4844’s Successor)
This cryptographic upgrade will reduce Ethereum’s state size and make it easier for nodes to operate with less storage, contributing to decentralization.
3. Rollup Decentralization
Projects like EigenLayer and Espresso are working on decentralized sequencing and data availability layers to replace current centralized rollup infrastructure.
4. New Use Cases
With gas fees lower, Ethereum can expand into emerging sectors like AI x blockchain, DePIN (decentralized physical infrastructure), and on-chain gaming—all of which require cheap, fast, and scalable computation.
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Final Thoughts
The Ethereum Dencun upgrade is one of the most impactful protocol changes since The Merge. While it doesn’t directly lower gas fees on Layer 1, it dramatically improves the economics of Layer 2 networks—Ethereum’s primary scaling path.
For users, it means cheaper transactions, better dApp experiences, and more possibilities in DeFi, NFTs, gaming, and beyond.
For developers and rollup builders, Dencun unlocks a new wave of experimentation and innovation.
The future of Ethereum is modular—and Dencun is the bridge between Ethereum’s current state and its scalable, decentralized, rollup-centric future.