Ethereum’s Dencun Upgrade: Assessing the Economic Impact and Trade-offs After 150 Days

Ethereum’s
Dencun
upgrade,
which
includes
the
implementation
of
EIP-4844,
has
significantly
altered
the
economic
landscape
of
the
network.
According
to

Galaxy.com,
the
introduction
of
blobs
and
type-3
transactions
has
led
to
notable
changes
in
transaction
costs,
rollup
activity,
and
Ethereum’s
overall
revenue.

Key
Metrics
Post-Dencun

In
the
150
days
following
the
upgrade,
Ethereum
saw
the
purchase
of
2,225,958
blobs
at
an
average
cost
of
$1.59
per
blob.
These
blobs
supported
1,104,315
Layer
1
transactions,
averaging
$5.22
per
transaction.
The
total
revenue
generated
from
blobs
amounted
to
2,692.39
ETH
and
$9,318,794,
with
89.45%
of
the
fee
revenue
burned
and
the
rest
allocated
to
validators
as
priority
tips.

Rollups
purchased
approximately
285
gigabytes
of
blob
data,
utilizing
about
76%
of
their
capacity.
The
fixed
size
of
each
blob
is
128KB,
and
Ethereum
can
process
a
maximum
of
six
blobs
per
block.
The
ephemeral
nature
of
blobs
means
they
are
pruned
from
most
Ethereum
nodes
after
roughly
two
weeks.

Rollup
Economics

The
introduction
of
blobs
has
reduced
rollup
costs
substantially.
Rollups
spent
$3,549,430
on
blobs,
translating
to
$16,473
per
gigabyte
used
and
$12,458
per
gigabyte
purchased.
This
is
a
significant
decrease
compared
to
the
daily
average
of
$1.07
million
before
the
Dencun
upgrade.
Rollup
margins
also
improved,
with
optimistic
rollup
margins
increasing
from
22.65%
to
92.3%
and
zero-knowledge
rollup
margins
rising
from
27.27%
to
66.7%.

However,
the
increased
activity
on
Layer
2
solutions
(L2s)
post-Dencun
has
led
to
higher
transaction
failure
rates,
particularly
among
high-activity
addresses,
likely
bots.
Low
fees
on
L2s
could
be
driving
this
increased
bot
activity.

Impact
on
Ethereum’s
Revenue
and
ETH
Supply

Despite
the
cost
reductions,
Ethereum’s
revenue
and
ETH
burn
rate
have
decreased
post-Dencun.
Total
revenue
earned
is
69%
below
the
pre-upgrade
average,
and
ETH
burned
is
84%
below
the
pre-upgrade
average.
The
shift
from
calldata
to
blobs
has
resulted
in
lower
ETH
burn
rates,
with
2,408
ETH
burned
from
blob
and
base
fees
of
type-3
transactions
compared
to
a
minimum
150-day
rolling
sum
of
3,286
ETH
pre-Dencun.

Validator
Revenue
and
Rollup
Activity

Validators
have
received
$974,876
in
priority
fees
from
type-3
transactions,
a
decline
compared
to
the
pre-Dencun
period.
The
total
revenue
from
blobs
and
type-3
transactions
is
significantly
lower
than
from
type-2
transactions
and
calldata
use,
with
Ethereum
earning
$9,318,794
from
blobs
compared
to
an
average
150-day
rolling
sum
of
$29.92
million
from
type-2
transactions.

Rollup
activity
has
increased,
with
transaction
counts
more
than
doubling
from
3.285
million
daily
transactions
pre-Dencun
to
6.656
million
post-Dencun.
This
surge
in
activity
is
attributed
to
reduced
transaction
costs,
with
Arbitrum
and
other
rollups
seeing
significant
declines
in
median
transaction
fees.

Conclusion

The
Dencun
upgrade
and
EIP-4844
have
improved
the
economics
of
Ethereum
rollups
by
reducing
operating
costs
and
increasing
transaction
activity.
However,
this
has
come
at
the
expense
of
Ethereum’s
revenue
and
ETH
burn
rate.
The
shift
towards
blobs
and
type-3
transactions
aligns
with
Ethereum’s
goal
of
becoming
an
efficient
data
availability
layer,
though
high
costs
could
resurface
if
demand
for
blobs
increases.
The
full
report
and
data
are
available
on
Galaxy’s
public
Dune
dashboard.

Image
source:
Shutterstock