How Ethereum’s Dencun Upgrade Could Lead to the Rise of Millions of Layer 3s - Ep. 620
Mar 15, 2024
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Jesse Pollak, the creator of Base at Coinbase, shares insights into Ethereum's recent Dencun upgrade, which significantly reduced transaction fees and boosted transactions. He explains how this upgrade differentiates Layer 1s from Layer 2s, sparking the potential rise of specialized Layer 3s. Pollak addresses concerns about the fragmentation and centralization of Layer 2s, and highlights the importance of onchain terminology over crypto jargon. He also discusses the exciting features of transient storage and improved composability between layers.
Dencun upgrade lowers transaction fees on Ethereum Layer 2 networks, driving increased user activity and adoption.
Ethereum's Layer 1 and Layer 2 networks are expected to differentiate, paving the way for specialized Layer 3 solutions and improved scalability.
Deep dives
Decentralized Layer 2 Scaling on Ethereum through Danku Upgrade
The Danku Upgrade on Ethereum focused on enhancing layer 2 scalability by utilizing proto dank sharding to reduce costs associated with storing transaction data. This upgrade led to substantial fee reductions on layer 2 networks like Optimism, Base, Arbitrum, and zkSync, resulting in significantly lower average transaction fees. By introducing blob space as a high-speed lane for transactions, the upgrade aims to drive down fees and increase throughput, laying the foundation for scaling Ethereum to accommodate thousands of transactions per second.
Enhancing User Experience and Use Cases on Layer 2 Networks Post Danku Upgrade
Following the Danku upgrade, users on layer 2 networks have experienced reduced fees and increased transaction speed, enabling activities such as cheaper USDC transfers, NFT minting, and trading on platforms like Uniswap and perpetual exchanges. The upgrade has attracted new users and encouraged increased activity as layer 2 networks like Base see a surge in demand, setting the stage for broader adoption and innovative use cases.
Layer 1 Settlement vs. Layer 2 General Use: Future of Ethereum Architecture
The evolving Ethereum architecture envisions layer 1 primarily for settlement purposes, with layer 2 networks acting as high-throughput, user-focused environments. Layer 2 networks leverage Ethereum's infrastructure for transactions, offering fast, cheap, and decentralized interactions for everyday users. Additionally, the emergence of layer 3 solutions is anticipated to bridge traditional off-chain applications with the on-chain economy, fostering seamless integration and enhancing user experiences.
Focus on Decentralization and Interoperability Amidst Criticisms of Ethereum's Layer 2 Strategy
Reflecting on criticisms of Ethereum's reliance on layer 2 solutions, the strategic shift towards decentralization and collaboration has been fundamental in advancing scalability solutions. Prioritizing open participation and decentralization has fueled the Ethereum ecosystem's growth and innovation, with continued efforts to enhance decentralization in layer 2 networks like Base and improve interoperability among diverse blockchain technologies. By addressing challenges and fostering synergy, Ethereum aims to uphold its position as a leading platform for decentralized applications.
Ethereum’s long-awaited Dencun upgrade finally went live this week, and many L2s immediately saw their transaction fees fall dramatically, as was the intention. Among them was the Coinbase-incubated Base, which was created by Jesse Pollak. Pollak joined Unchained to discuss the impact Dencun was having on Base; how he thinks Layer 1s and Layer 2s will start to differ from one another and eventually spawn a multitude of specialized Layer 3s; his response to criticisms of the increasing use of Layer 2s, what he’s focusing on now, and why he supports using the word “onchain” over “crypto” or “web3.”
Show highlights:
The problem that Dencun is trying to solve
The benefits of blobs and blobspace
How Dencun has already reduced Base’s fees, but also increased its transactions
How Jesse thinks Layer 1s and Layer 2s will start to become differentiated from each other
The rise of Layer 3s
How Jesse addresses criticisms of fragmentation and centralization arising from the increasing use of Layer 2s
Why Jesse is particularly excited about two features of the Dencun upgrade—transient storage and increased composability between L1s and L2s
What Jesse and the Base team are focusing on now
Why Jesse thinks that “onchain” is a better word to describe the industry than “crypto” or “blockchain” or “web3”