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Why is Ethereum EIP-4844 upgrade bullish for L2 projects

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The recent hype surrounding the memecoin Pepe has shown once again that the Ethereum network has still not gotten its scaling problem under control. The Frog Coin hype sent transaction fees skyrocketing on the world’s largest smart contract platform. The result: A simple token swap on decentralized exchanges like Uniswap cost more than $50.

Ethereum Average Gas Price
Ethereum Average Gas Price. Source:

In the meantime, the fuss about PEPE seems to be flattening out. The costs for a normal token exchange are currently still between $10 and $15 too high for mass adoption.

Unsurprisingly, the Ether developer communit is still working flat out to implement upgrades that will improve Ethereum’s scaling. One of these upgrades is the ETH Improvement Proposal (EIP)-4844, also known as proto-thanksharding. It is expected to be implemented in the second quarter of 2023.

What is the Ethereum EIP-4844 Upgrade?

The EIP-4844 is a proposed upgrade to the Ethereum protocol that aims to reduce fees and increase the capacity of the ETH network. It plans to achieve these goals by introducing a new transaction type, the “blob” of data accepted.

This new transaction type makes it possible to store large amounts of data on the Ether blockchain on cheaper terms than before. As a result, transaction data from Layer 2 networks can be stored more efficiently on the ETH main network. This makes Layer 2 networks cheaper and the transaction capacity of the ETH ecosystem can increase overall.

Why is the upgrade bullish for L2 projects?

EIP-4844 can be particularly bullish for Layer 2 rollup networks like Arbitrum, Optimism, or Starknet. This is due to the following three factors:

  1. Cost reduction: The introduction of blob transactions will reduce gas fees for L2 networks like Arbitrum. This is because Blob transactions allow Layer 2 networks to store their off-chain processed transactions on the Ethereum mainchain more cheaply than before.
  2. Increased scalability: L2s can process more transactions per second through EIP-4844. This is because they unlock more transaction capacity by improving the way they store their transactions on the Ethereum mainchain.
  3. More safety: EIP-4844 introduces a new security model that increases the security of Layer 2 solutions like Arbitrum. It makes it harder for malicious actors to manipulate these networks.

The EIP-4844 upgrade primarily makes ETH-L2 networks more attractive for users and developers. It therefore does not seem unreasonable that their adoption can be further promoted by the upgrade.

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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