Ethereum Dencun Upgrade Drastically Reduces Layer-2 Fees, Boosts Scalability

Executive Summary

The Ethereum Dencun upgrade, a portmanteau of its "Deneb" (consensus layer) and "Cancun" (execution layer) components, was successfully deployed on the mainnet on March 13, 2024. This significant technical advancement aims to enhance the network's scalability, security, and transaction efficiency. The cornerstone of the Dencun upgrade is the implementation of Proto-Danksharding (EIP-4844), which has led to a dramatic reduction in transaction fees for Layer-2 (L2) rollup solutions built on Ethereum.

The Event in Detail

The Dencun upgrade activated on the Ethereum mainnet at epoch 269568, precisely at 13:55 UTC on March 13, 2024. Its primary innovation, EIP-4844, or Proto-Danksharding, introduces a novel mechanism for handling data on the network. Historically, L2 transaction data was posted to the Ethereum mainnet as expensive "calldata" due requiring permanent storage. EIP-4844 replaces this with "blobs"—ephemeral data packets that are temporarily stored on Ethereum for approximately three weeks. Given that calldata previously accounted for 73% to 90% of L2 transaction costs, this shift to lightweight blob data allows L2s to post large data packets far more efficiently. Each Ethereum block can accommodate up to six blobs, with an average target of three blobs per block designed to maintain consistent fees and balance network demand. The upgrade also features a multi-dimensional fee market, preventing blob-carrying transactions from competing with regular transactions for blockspace, thereby stabilizing and lowering fees for rollup users. The Dencun upgrade encompasses several other protocol changes detailed in EIP-7569, including EIP-1153 for transient storage opcodes, EIP-4788 for beacon block root in the EVM, EIP-5656 for memory copying, EIP-6780 for SELFDESTRUCT modifications, EIP-7044 for perpetually valid signed voluntary exits, EIP-7045 for increased maximum attestation inclusion slots, EIP-7514 for maximum epoch churn limits, and EIP-7516 for the BLOBBASEFEE opcode.

Market Implications

The practical impact of the Dencun upgrade has been substantial for the Ethereum ecosystem. Average gas fees on prominent L2 networks such as Arbitrum, Optimism, Base, zkSync, and Zora have plummeted by as much as 99%, with some transactions now costing fractions of a cent. For instance, Arbitrum saw gas fees drop from $0.37 to $0.012, while Optimism experienced a similar reduction from $0.32 to $0.009. Even the Ethereum mainnet observed a reduction in median gas fees from $6.60 to $4.30. This drastic reduction has fueled a surge in L2 network activity; Base has seen a 319.3% increase in daily transactions since the upgrade, Arbitrum is up by 45.7%, and Optimism by 29.8%. Concurrently, Ethereum's daily transaction volume has decreased by 30.8%, indicating a significant migration of activity to more cost-efficient Layer-2 solutions, aligning with Ethereum's strategic roadmap. The reduced transaction costs on L2s directly translate to more accessible and affordable participation in the Decentralized Finance (DeFi) sector, including lending platforms, decentralized exchanges (DEXs), and yield farming applications. This is expected to trigger a new wave of growth for established DeFi projects and emerging innovations, attracting a broader base of users previously deterred by high gas costs. Furthermore, the Dencun upgrade, alongside burgeoning inflows into Spot Ethereum Exchange-Traded Funds (ETFs) from institutions like BlackRock and Fidelity, has bolstered institutional interest and contributed to ETH's price appreciation, which saw a 75% increase year-to-date from July 2024 to August 2025, pushing ETH towards the $4,600-$5,000 range, with expectations to anchor above $5,000 into Q4 2025 and beyond.

Business Strategy & Market Positioning

The Dencun upgrade significantly enhances Ethereum's utility by creating a more scalable and affordable ecosystem. This marks a strategic shift where the focus moves from the mainnet handling all transactions to fostering a vibrant and interoperable L2 ecosystem. Future upgrades, such as the Pectra (Prague-Electra) upgrade, scheduled for early 2025 (or May 27, 2025), will build upon Dencun's foundation, further enhancing Proof-of-Stake (PoS) and EVM functionality. Pectra is expected to introduce EIP-7702 for account abstraction, aiming for gasless transactions and simplified wallets, and increase validator stake limits from 32 ETH to 2,048 ETH to mitigate centralization concerns. The long-term vision includes "full danksharding" for even greater scalability, aiming for over 100,000 transactions per second with minimal costs. Innovations like LeanVM, a minimal zero-knowledge proof virtual machine, are also being developed to reduce costs and improve efficiency, with a tenfold increase in recursion speed targeted. This evolving strategy positions Ethereum as the economic settlement layer and secure data availability layer for a vast network of L2s, creating market opportunities in areas such as cross-L2 liquidity solutions, specialized L2s for specific use cases (e.g., gaming, institutional DeFi), and advanced data analytics tools for monitoring the multi-layered network.

Broader Context

The Dencun upgrade represents a critical milestone in Ethereum's journey towards its long-term goals of scalability, decentralization, and sustainability. By addressing the historically high transaction fees and network congestion through Proto-Danksharding, Ethereum strengthens its position as the dominant foundation for the decentralized internet and the broader Web3 ecosystem. The enhanced efficiency and reduced costs are expected to serve as a catalyst for widespread adoption of decentralized applications (dApps) across various sectors, from gaming and social media to supply chain management and digital identity. The increased institutional validation, evidenced by ETF inflows and the network's enhanced technical capabilities, bolsters Ethereum's legitimacy as a mainstream financial asset, fostering innovation and a more robust, scalable foundation for the future of decentralized technologies.

source:

[1] Ethereum Dencun Cancun Upgrade Approaching: All You Need to Know | BlockTempo - The Most Influential Blockchain News Media[2] Ethereum's Epochal Leap: Dencun Upgrade Ignites Scalability, ETF Inflows Fuel Bullish ... - Markets - The Pilot News[3] Ethereum Cancun Upgrade Explained: EIP List & Release Date - Datawallet

Related News

Sep 18 2025, 18:31

Hyperliquid USDH Vote Concludes, US Senate Advances Crypto Bill, Security Exploits Persist

Executive Summary Hyperliquid finalized its inaugural major governance vote, electing Native Markets to issue its native USDH stablecoin. Simultaneously, the U.S. Senate advanced a comprehensive regulatory framework for digital assets, while the broader cryptocurrency sector contended with two significant security exploits impacting a decentralized finance platform and the software supply chain. The Event in Detail Hyperliquid USDH Governance Hyperliquid, a decentralized perpetuals exchange, concluded its first major on-chain governance vote beyond routine asset listings, selecting Native Markets to issue its native USDH stablecoin. Native Markets secured approximately 70% support from Hyperliquid validators and staked HYPE token holders during the week-long voting process. The decision aims to reduce Hyperliquid's reliance on external assets, particularly USDC, which currently accounts for a dominant ~$6 billion on-chain volume on the network. Established competitors, including Paxos, BitGo, Frax, and Ethena, either withdrew their bids or were outperformed by Native Markets. The USDH stablecoin will be fully backed by cash and short-term U.S. Treasuries. BlackRock and Superstate are slated to manage the off-chain reserves, ensuring yield generation and security. On-chain custody and regulatory compliance, including adherence to the GENIUS Act and global standards like MiCA, will be handled by Bridge (Stripe-owned). Native Markets has proposed an aggressive yield-sharing model, committing 50% of the stablecoin reserve yields towards HYPE token buybacks via the Hyperliquid Assistance Fund and the remaining 50% for USDH distribution through strategic partnerships. This strategic move is intended to redirect economic value from external stablecoin providers to the Hyperliquid ecosystem and its token holders. US Senate Regulatory Developments On September 5, 2025, the U.S. Senate Banking Committee released a 182-page discussion draft of the Responsible Financial Innovation Act (RFIA) of 2025. The proposed legislation outlines a comprehensive market structure for digital assets and includes provisions to combat illicit finance. Under the draft, digital asset service providers would be classified as financial institutions for purposes of the Bank Secrecy Act, subjecting them to laws related to economic sanctions, anti-money laundering (AML), customer identification, and due diligence. The RFIA draft mandates the SEC to establish "Regulation Crypto" rules, providing exemptions for certain offers or sales of ancillary assets if they do not exceed $75 million or 10% of total outstanding ancillary assets. It also establishes a safe harbor for non-fungible tokens (NFTs), stipulating that an NFT transaction would not be deemed a security offering unless it contains all elements of an investment contract, with exceptions for mass-minted items or fractionalized interests. Furthermore, software developers providing technical assistance to distributed ledger systems or decentralized finance (DeFi) trading protocols would be exempt from the RFIA. The bill also promotes regulatory innovation by proposing a "CFTC-SEC Micro-Innovation Sandbox" for testing financial products and requires a joint study on the regulatory treatment of tokenized real-world assets within 360 days of enactment. Crypto Security Incidents The crypto ecosystem recently experienced two notable security breaches. SwissBorg's SOL Earn wallet suffered an exploit resulting in the theft of approximately 192,600 SOL, valued at $41.5 million. The incident stemmed from a compromised application programming interface (API) of a third-party partner, not an internal breach of SwissBorg's platform. The loss impacted less than 1% of SwissBorg users and represented about 2% of the company's total assets. SwissBorg has committed to covering all user losses and is actively pursuing recovery efforts with white-hat hackers and law enforcement. In parallel, a widespread npm supply chain attack occurred on September 8, 2025. Attackers leveraged a phishing campaign to compromise maintainer accounts for npm, the widely used Node Package Manager. Malicious code was subsequently injected into 18 popular JavaScript packages, including 'chalk' and 'debug,' downloaded over 2 billion times. This malware was designed to intercept browser APIs and redirect crypto transactions in real-time, posing a significant threat to wallet users and dApp frontends. This incident underscores the vulnerability of centralized trust models and third-party dependencies in the broader software supply chain, affecting Web3 applications. Solana Ecosystem Performance Solana has emerged as a revenue leader in the blockchain sector, reporting an annual revenue of $1.25 billion, which is approximately 2.5 times higher than Ethereum's $523 million. This performance signals robust demand for Solana's block space. Application-level revenue surged by over $210 million in the last 30 days, with key contributors such as Pump.fun and Axiom Pro generating approximately $53 million and $51 million, respectively. The blockchain's base layer also contributed $4.56 million in on-chain fees during the same period. Market Implications The Hyperliquid USDH vote signifies a strategic shift within the decentralized exchange landscape, as protocols seek to internalize economic value by launching native stablecoins. This trend could reduce the market dominance of established external stablecoin issuers like Circle's USDC and redistribute yield to native token holders, potentially fostering greater decentralization in stablecoin markets. U.S. regulatory developments, particularly the RFIA draft, indicate a move towards a more structured and compliant digital asset market. The proposed inclusion of digital asset service providers under the Bank Secrecy Act suggests increased scrutiny on anti-money laundering and illicit finance prevention. While fostering innovation through sandboxes and NFT safe harbors, the legislation simultaneously imposes stricter compliance requirements that could reshape operational models for crypto businesses in the United States. Ongoing security incidents, such as the SwissBorg exploit and the npm supply chain attack, highlight persistent vulnerabilities across the crypto and software supply chain. These breaches can erode investor confidence and underscore the critical need for enhanced security measures, robust auditing, and decentralized trust mechanisms to mitigate risks to user funds and the integrity of decentralized applications. These events may drive demand for more secure infrastructure and hardware wallet solutions. Solana's demonstrated financial performance, with significantly higher annual revenue than Ethereum, reflects a growing and active application ecosystem. This indicates strong competition among Layer 1 blockchains for block space demand and economic value generation, potentially influencing developer and user migration across different networks. Broader Context The Hyperliquid governance vote marks a maturation of decentralized autonomous organization (DAO) decision-making within the DeFi sector, establishing precedents for how protocols manage critical infrastructure like stablecoins. This development could inspire similar initiatives across other decentralized platforms seeking greater self-sufficiency. Legislative efforts like the RFIA draft represent an ongoing, multi-faceted attempt by U.S. lawmakers to bring regulatory clarity to the digital asset space. The proposed framework seeks to balance innovation with consumer protection and financial stability, reflecting a global trend towards defining the legal and operational boundaries for cryptocurrencies and blockchain technology. The interplay between various legislative proposals and regulatory bodies (SEC, CFTC) will shape the future landscape of crypto regulation in the United States. The recent security breaches are part of a broader pattern of rising crypto thefts, with figures indicating over $2.17 billion already stolen in 2025. This persistent threat environment necessitates continuous evolution in cybersecurity practices within both the crypto industry and the wider technology sector supporting Web3. The npm attack, in particular, illustrates how vulnerabilities in traditional software supply chains can directly impact the security of decentralized applications. The robust growth observed in ecosystems like Solana, alongside institutional interest and ongoing innovation, contrasts with the challenges posed by regulatory uncertainty and security risks. This dynamic environment suggests a sector undergoing rapid development, characterized by both significant opportunities for expansion and inherent operational complexities that demand continuous adaptation from market participants and regulators.

Sep 18 2025, 18:29

TON Blockchain Leverages Telegram's 950 Million Users to Accelerate Web3 Mass Adoption

Executive Summary The Open Network (TON) blockchain is experiencing accelerated growth, largely driven by its deep integration with the global messaging application Telegram, which boasts 950 million active users. This strategic alignment aims to facilitate Web3 mass adoption by embedding decentralized applications and financial services directly within a familiar social platform. The ecosystem has seen a significant surge in user engagement and Total Value Locked (TVL), reflecting increased interest and investment. Telegram itself has reported substantial financial gains directly linked to its crypto activities and association with TON, signaling a new model for Web3 expansion through established social infrastructure. The Event in Detail The journey of The Open Network began in 2018 as the Telegram Open Network, initiated by Telegram's founders, Pavel and Nikolai Durov, with a record-breaking $1.7 billion fundraiser. However, regulatory intervention by the U.S. Securities and Exchange Commission (SEC) in 2020 led Telegram to abandon the project. The open-sourced code was subsequently adopted by a community of developers, forming the TON Foundation in 2021, which revitalized the project under the name The Open Network. Telegram has since officially endorsed TON as its blockchain of choice, marking a pivotal moment for the network. TON's core strategy revolves around its tight integration with Telegram's vast user base. This includes built-in features such as the "@wallet" and TON Space, enabling users to send and receive cryptocurrencies directly within the messaging app. Furthermore, Telegram incentivizes engagement by sharing 50% of its ad revenue with public channel owners, payable exclusively in Toncoin (TON). The introduction of "Telegram Stars" provides an in-app currency for creator tipping, deepening the economic ties. In 2024–2025, Telegram further solidified this integration with a mini-app store and expanded TON functionalities. This has led to substantial user acquisition through viral "tap-to-earn" games like Notcoin and Hamster Kombat, which have been instrumental in introducing millions to their first crypto wallets. Financial Mechanics and Business Strategy Telegram's financial performance in the first half of 2024 significantly benefited from its crypto initiatives. The company reported H1 2024 revenue of $525 million, representing a 190% year-over-year increase. Its cryptocurrency holdings escalated from $400 million at the end of 2023 to $1.3 billion in H1 2024. This growth was partially driven by $353 million from the sale of crypto assets and $225 million from a now-terminated exclusivity deal that designated TON tokens as the sole currency for ads on Telegram. The platform's exposure to TON has introduced volatility, as evidenced by a 25% drop in TON's price following Durov's arrest in August 2025, though it subsequently recovered to $6.32 by late November. Technologically, TON is designed as a "blockchain of blockchains," utilizing an "infinite sharding" model to achieve horizontal scalability. Its proof-of-stake (PoS) validation system ensures fast transaction finality, typically between 2.8 to 3.0 seconds. The network prioritizes a native technology stack, including standards like TON Connect and Jettons, focusing on low latency and minimal fees for consumer-grade applications, distinguishing it from other Layer 1 solutions like Ethereum, which emphasize rollup-centric scaling. Strategically, TON is expanding its reach. The appointment of Max Crown, former MoonPay CFO and COO, as TON Foundation CEO, signals a push for global scale and regulatory alignment. The network is set to integrate Ethena's synthetic dollar USDe, and a $500 million Telegram Bond Fund via Libre is spearheading real-world asset (RWA) tokenization. The rollout of TON Space to U.S. users in Q2 further expands its market penetration. Development efforts are fostered through initiatives like the TON Global Hacker House and a Tact smart contract challenge, attracting thousands of developers with significant prize pools. Broader Market Implications TON's integration with Telegram presents a compelling case study for Web3 mass adoption, offering a blueprint for leveraging existing social platforms to onboard millions of users into the decentralized ecosystem. By embedding crypto functionalities directly within Telegram's vast user base, TON is attempting to make blockchain technology "invisible" to the end-user, thereby lowering the barrier to entry for decentralized applications and services. This approach could fundamentally alter how users interact with Web3, moving beyond niche crypto communities into mainstream digital life. The success of TON also carries implications for corporate adoption trends in the blockchain space. Telegram's direct financial gains from its crypto holdings and operations, coupled with its active role in fostering the TON ecosystem, demonstrate a tangible economic model for companies exploring Web3 integration. This could encourage other large technology firms with extensive user bases to consider similar strategies, potentially accelerating the convergence of traditional digital platforms and decentralized technologies. Investor sentiment remains largely bullish due to the perceived potential for widespread adoption, despite inherent volatility and ongoing regulatory ambiguities. The network's TVL surged from $76 million to a peak exceeding $740 million, although it later stabilized around $600–650 million in mid-2025 after cooling from initial incentive programs. Daily active wallets grew from 2.9 million to 32 million within one year, and the total number of created accounts surpassed 151 million. While regulatory clarity remains a critical factor, TON's continuous expansion into DeFi, RWA tokenization, payments, and Telegram-native applications positions it as a significant player in the evolving landscape of blockchain technology and its mainstream integration.

Sep 18 2025, 18:29

Bitcoin Ordinals Redefine Network Utility and Spur Ecosystem Debate

Executive Summary The emergence of Bitcoin Ordinals has fundamentally reshaped the Bitcoin ecosystem, enabling direct data storage and creating a multi-billion dollar market, while simultaneously igniting a debate over the network's fundamental purpose and future utility. The Event in Detail Bitcoin Ordinals, introduced by developer Casey Rodarmor in January 2023, allow users to "inscribe" various forms of data—ranging from images and text to smart contracts—directly onto individual satoshis, the smallest unit of Bitcoin. This process utilizes the network's SegWit update from 2017, which created discounted storage space, and the 2021 Taproot upgrade, which relaxed data size limits, thereby facilitating the embedding of larger files. Unlike NFTs on other blockchains that often link to external files, Ordinals embed the entire data piece within the Bitcoin transaction itself, ensuring its permanence and security on the blockchain. This innovation has conjured a multi-billion dollar market for these digital artifacts. Building on the Ordinals protocol, the BRC-20 token standard was launched in March 2023 by an anonymous developer named Domo, allowing for the creation of fungible tokens on Bitcoin through simple text inscriptions. Rodarmor subsequently developed the Runes Protocol, which went live in April 2024, designed as a cleaner and more efficient system for token issuance on Bitcoin, compatible with scaling technologies like the Lightning Network. Financial Mechanics The market for Bitcoin Ordinals and related inscribed assets has demonstrated significant financial activity. Sales have exceeded $6.2 billion from nearly 4 million trades. A single day in July 2025 recorded $11.5 million in sales, marking a peak for the year. The total value of BRC-20 tokens briefly surpassed $3.3 billion. These activities have significantly contributed to miner revenue, with Ordinals contributing over $500 million in fees since 2023. This contrasts with more recent figures, where Messari Research Manager AJC noted daily fee revenue dropped below $500,000, with annualized revenue around $179 million, representing the lowest since Ordinals' inception. Daily fee revenues in 2025 have shown inconsistency, ranging from $3,000 to $537,000, a notable decline from the nearly $10 million peak observed in December 2023. These fees are crucial for network security as the block subsidy diminishes. Business Strategy & Market Positioning Ordinals have expanded Bitcoin's utility beyond its traditional role as a pure store of value and peer-to-peer cash system. This has fostered a "builder culture," attracting new developers and creative energy previously found predominantly on competing blockchains like Ethereum. A notable example of this strategic shift is MicroStrategy's Orange Protocol, which leverages Ordinals to create a permanent, forgery-proof digital identity system on the Bitcoin blockchain. This demonstrates a clear move by corporate entities to utilize Bitcoin's foundational security for novel applications, effectively positioning Bitcoin for a "second act" that includes broader data and identity management functionalities. Market Implications The emergence of Ordinals has sparked a significant debate within the Bitcoin community regarding the network's purpose and future. Critics, including Bitcoin Core developer Jimmy Song, argue that the Taproot upgrade inadvertently enabled "spam-like activity" by overlooking social attack vectors, leading to network congestion. Adam Back of Blockstream contends that these data-heavy inscriptions displace legitimate transactions. Conversely, proponents argue that Ordinals provide a vital innovation, contributing substantial transaction fees necessary to secure the network as the block subsidy decreases. Leonidas, a leading figure in the Ordinals ecosystem, has stated he would fund a Bitcoin Core fork if developers attempt to censor Ordinals or Runes transactions, an stance supported by miners controlling over 50% of the network's hash rate. This increased activity and congestion have accelerated the development of Layer 2 scaling solutions, such as Lightning Network, Liquid, Stacks, and Rootstock (RSK), which are being adapted to handle Ordinal-related transactions more efficiently. However, the ecosystem also faces challenges from centralized platforms; OKX Web3 Wallet announced it would cease support for the Runes trading market and related functions by June 5, 2025. This decision, potentially driven by liquidity or compliance concerns, is expected to reduce liquidity for Runes tokens and push trading toward decentralized exchanges like RichSwap or DotSwap, highlighting the tension between innovation-driven protocols and compliance-heavy centralized exchanges. Expert Commentary Bitcoin Core developer Jimmy Song has criticized the Taproot upgrade for "overlooking the social attack surface" that allowed "spam-like activity," such as Ordinals and BRC-20 tokens, to proliferate on the Bitcoin network. Leonidas, a prominent figure in the Ordinals space, has stated he will fund a Bitcoin Core fork if developers attempt to censor Ordinals or Runes transactions in the upcoming v30 upgrade, indicating a deepening ideological divide. Adam Back of Blockstream argues that data-heavy inscriptions displace legitimate transactions, suggesting a negative impact on the network's primary function. In contrast, Leonidas points out that Ordinals have contributed over $500 million in fees since 2023, bolstering Bitcoin's long-term security. Despite these contributions, Messari Research Manager AJC noted that the network is "virtually a ghost town," with daily fee revenue dropping significantly, indicating inconsistent economic benefit from these inscriptions. Broader Context The rise of Ordinals represents a pivotal moment in Bitcoin's evolution, forcing a re-evaluation of its fundamental purpose. The upcoming v30 upgrade, set for October 2025, which will remove the 80-byte OPRETURN limit and enable up to 4MB** of data per transaction, is expected to further fuel on-chain data capacity and intensify the debate. This dynamic interplay between technical innovation, market demand, and ideological perspectives highlights the ongoing tension between Bitcoin maximalists, who prioritize its monetary system function, and innovators seeking to expand its utility as a generalized ledger. The decision by major centralized platforms like OKX to withdraw support for certain token standards underscores the complexities of balancing regulatory compliance with supporting nascent, decentralized protocols, pushing these innovations towards less regulated, albeit often less accessible, decentralized venues.