Dencun, has been live for 150 days, bringing significant changes to the network. This upgrade, featuring the much-anticipated EIP-4844, introduced a new system of “blobs” and type-3 transactions. These changes have impacted transaction costs, revenue, and overall economic activity on Ethereum. Let’s break down these effects in detail to understand how they have reshaped the network’s financial landscape.

Key Changes Post-Dencun Upgrade

Since the implementation of Dencun, Ethereum has experienced several notable changes:

• Blobs and Transactions: Over the past 150 days, Ethereum has processed 2,225,958 blobs at an average cost of $1.59 each. These blobs have been integral in supporting 1,104,315 Layer 1 transactions, each costing an average of $5.22. In total, revenue from blobs has reached 2,692.39 ETH and $9,318,794. Of this revenue, 89.45% has been burned, reducing the circulating supply of ETH, while the remaining amount has been distributed as priority tips to validators.
• Rollups Utilization: Rollups, which are solutions designed to enhance Ethereum’s scalability, have purchased about 285 gigabytes of blob data, using approximately 76% of their available capacity. Each blob has a fixed size of 128KB, and Ethereum can process up to six blobs per block. Blobs are temporary, usually removed from most Ethereum nodes after about two weeks.

The Economic Impact on Rollups

The Dencun upgrade has had a substantial effect on rollup economics:

• Cost Reductions: The cost of using blobs has dropped significantly. Rollups spent $3,549,430 on blobs, which translates to $16,473 per gigabyte used and $12,458 per gigabyte purchased. This is a marked decrease compared to the pre-Dencun daily average expenditure of $1.07 million. Moreover, rollup margins have improved, with optimistic rollup margins climbing from 22.65% to 92.3%, and zero-knowledge rollup margins increasing from 27.27% to 66.7%.
• Transaction Failures: Despite these cost savings, there has been an uptick in transaction failures, particularly among high-activity addresses, likely due to increased bot activity. The low fees on Layer 2 solutions might be contributing to this rise in failed transactions.

Effects on Ethereum’s Revenue and ETH Supply

The economic adjustments following the Dencun upgrade have had mixed results:

• Revenue Decline: Ethereum’s overall revenue has dropped by 69% compared to pre-Dencun levels, and the ETH burn rate has decreased by 84%. This is primarily due to the shift from call data to blobs. Only 2,408 ETH has been burned from blob and base fees of type-3 transactions, compared to a minimum rolling sum of 3,286 ETH from type-2 transactions before the upgrade.
• Validator Revenue: The revenue from priority fees paid to validators has also decreased. Validators have earned $974,876 from type-3 transactions, a reduction from the pre-Dencun period. Total earnings from blobs and type-3 transactions amount to $9,318,794, which is significantly lower than the $29.92 million average from type-2 transactions.

Surge in Rollup Activity

One of the key outcomes of the Dencun upgrade is the increased activity on rollups:

• Transaction Volumes: Daily transaction counts have surged from 3.285 million transactions before Dencun to 6.656 million transactions afterward. This rise is attributed to the reduced transaction costs, with platforms like Arbitrum and other rollups seeing significant decreases in median transaction fees.

Conclusion

Ethereum’s Dencun upgrade and EIP-4844 have succeeded in making rollups more cost-effective and increasing transaction activity. However, these benefits come with some trade-offs, including a decrease in Ethereum’s revenue and ETH burn rate. The shift towards blobs and type-3 transactions has aligned Ethereum with its goal of becoming a more efficient data availability layer. Nonetheless, if demand for blobs increases, the costs might rise again.