Cancun Upgrade is the next upgrade with factors that decisively influence the development of the Layer 2 network in both the long and short term. If Shanghai Upgrade has contributed to promoting the LSD and LSDfi network trends, then whether Cancun Upgrade will further promote the Layer 2 trend or not, everyone will find out with us in the article below.
To better understand Cancun Upgrade and Layer 2, people can refer to some of the articles below:
- What is Cancun Upgrade? Cancun Upgrade And Things To Know
- What is Danksharding? All About Danksharding & Ethereum’s EIP 4844
- What is Layer 2? Complete Guide to Layer 2 Solutions
- What is Shanghai Upgrade? Will ETH Be Sold Off By Investors?
Cancun Upgrade Overview
Cancun Upgrade is the next upgrade of the Ethereum network after the Shanghai Upgrade event, allowing users to withdraw ETH from the Beacon Chain network and LSD platforms such as Lido Finance, Rocket Pool, Coinbase,… Cancun Upgrade is expected There will be many different EIPs such as 4844, 6790, 6475, 1153,…
However, in this article we will only focus on one of the most important EIPs in the Cancun Upgrade, which is EIP 4844. With the EIP 4844 update, we have a new type of data to replace Call Data, which is is Blob Data. With Blob Data there will be some changes as follows:
- Blob Data will be stored for 1 – 3 months on Ethereum and then deleted compared to Call Data being stored permanently.
- Blob Data has a much larger capacity of 125KB compared to Call Data of only 10KB, this makes Blob Data compress more transactions combined with EIP 4488.
The above two factors can make transaction fees on Layer 2 platforms much cheaper. According to some estimates, transaction fees on Layer 2 can be 10 – 100 times cheaper than the current level.
Transaction fees on Layer 2 according to L2Fees
The transaction fees on Arbitrum, Optimism, zkSync are currently $0.23, $0.16 and $0.32 respectively. If after Cancun Upgrade, the transaction fee on Layer can be reduced by 10 – 100 times, the fee on Arbitrum will be $0.023 – $0.0023, the above fee Optimism will be $0.016 – $0.0016 or on zkSync it is expected to be $0.032 – $0.0032, not to mention that Arbitrum itself is also preparing to deploy Arbitrum Stylus which will also optimize the network or zkSync Era has not yet completed the network.
This means that Layer 2 will not have to worry about fees for a relatively long period of time even if there is a sudden increase from the user. Maybe the first challenge of Layer 2 platforms is that if Layer 2 becomes a big trend in the next cycle, causing the number of users and transactions to skyrocket about 10-20 times, then we can continue to observe. In addition, if the fee can be improved from the current 50 – 100 times, the above figure of 10 – 20 times will not be too much of a concern. It can be said that with EIP 4844 or Danksharding, Layer 2 is aiming for a boom cycle from 2024 – 2028.
Cancun Upgrade Promotes Layer 2 Development
Transaction fees on Layer 2 are resolved
With Cancun Upgrade, transaction fees on Layer 2 will no longer be a barrier. Now the transaction fees will be as cheap as the popular Layer 1 platforms today, there will certainly no longer be any barriers with Layer platforms. 2 when:
- Most users already understand Layer 2 in general as well as Rollup in particular. Not only that, investors pay special attention to Optimism’s Superchain or Arbitrum’s Layer 3, zkSync or StarkNet.
- Cash flow can easily flow to Layer 2 through Native Bridges or Bridges provided from 3rd parties. Cash flow can also flow directly from CEX to Layer 2.
- Arbitrum & Optimism has demonstrated the level of practical use for today’s Layer 2 platforms, not just on paper.
Obviously, transaction fees are the ultimate problem for Layer 2 platforms. During peak times on the Arbitrum network, transaction fees have pushed up to nearly $1 (when ARB first launched) and transaction fees have been pushed up even further. higher on Ethereum itself when the Arbitrum Odyssey event took place. Obviously, with Cancun Upgrade, this problem has been completely solved in theory. We may need some events to realize the extent of Cancun Upgrade’s impact on Layer 2 platforms such as how?
Cancun Upgrade officially Unlock Layer 2
If Shanghai Upgrade allows users to withdraw ETH from the Beacon Chain, it would seem to have a negative impact on the decentralized ability of Ethereum PoS, but it has the opposite effect. More ETH was brought into Staking and thereby promoted the strong development of the entire LSD industry and especially gave birth to a new industry, LSDfi.
Obviously, the Cancun Upgrade has a theoretical impact that is extremely positive for Layer 2 platforms. Transaction fees will be the final straw that helps users return to Layer 2 platforms, especially those platforms that already have a sustainable ecosystem like Arbitrum and Optimism.
So if Cancun Upgrade is successful and cash flows back to the ecosystem, how will we invest according to a plan? In the previous period, we usually invested according to the trends of AMM, Lending & Borrowing, Derivatives,… but the current period is quite different. With me:
- Determine which piece of the puzzle that ecosystem focuses on? Perp DEX, Stablecoin, Option, Social,… then find the leading project in that segment on that system.
- Identify projects with a good story in the ecosystem like Plutus DAO in the past with the vision of Managing the entire Arbitrum ecosystem,…
- Identify newly launched projects and products that can cause FOMO for investors like Camelot does with its Launchpad platform.
- Look for small-cap projects that fit the overall trend of the entire ecosystem.
Besides, each ecosystem will look for investment opportunities in different ways because each ecosystem has a different look such as:
- Arbitrum: Not only investing, but I expect projects in the ecosystem to simultaneously deploy ARB received from the previous DAO Airdrop and I can completely become an LP to search for Incentives based on the assets I have. . Besides, I hope GMX 2.0 can create a boost for the entire Arbitrum ecosystem.
- Optimism: I will monitor Velodrome and the Superchain ecosystems relatively closely to look for suitable projects like on Base I am observing Aerodrome and Friend.tech.
- zkSync: The ecosystem is quite new and doesn’t have anything new, but I still follow it closely.
- StarkNet: I’m waiting for a good Launchpad platform to be able to catch the full wave of StarkNet because this is one of the Layer 2s with the most Native projects.
For me, I will observe and time based on many different factors from cycles, to growth drivers, to each ecosystem and from there find the best positions for myself. And it’s no exception if Cancun Upgrade can push a completely new trend like the way Shanghai Upgrade created LSDfi.
Summary
Cancun Upgrade has solved one of the last key problems of Layer 2 platforms. Will Layer 2 really explode when Cancun is officially completed?
