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Layer 2 scaling solutions bring prosperity to the Ethereum ecosystem. Due to Ethereum's emphasis on decentralization and security in its design philosophy, transaction processing speed is relatively slower, leading to limited network throughput and affecting the scalability of dApps. The community has implemented Layer 2 scaling on top of Ethereum Layer 1 through various technological paths such as Rollup, sidechains, and state channels. This enhances transaction throughput without sacrificing decentralization and security, reducing gas fees and transaction speed while maintaining transaction security.
The POS upgrade solidifies the leading position of smart contract market cap. Transitioning from Ethereum 1.0's Proof of Work (PoW) consensus mechanism to Ethereum 2.0's Proof of Stake (PoS) eliminates the reliance on miners' computing power to maintain the network. This effectively addresses the challenges of high energy consumption, potential security issues, and network congestion associated with PoW, providing sustainability and security for supporting large-scale decentralized applications (dApps). Additionally, the combination of Ethereum's approximately 4,500 dApps and the supply net deflation resulting from the EIP-1559 protocol contributes to the increased value of ETH, enhancing network security.
The Ethereum Cancun-Dencun upgrade draws market attention to the approval of the Ethereum ETF. The Dencun upgrade signifies a significant advancement in the Ethereum network, primarily focusing on reducing operational costs for Layer 2 scaling solutions. By introducing dedicated storage space, this upgrade is expected to cut 80% of Layer 2 transaction costs. This improvement not only has the potential to significantly boost the competitiveness of Layer 2 platforms like Optimism and Arbitrum, narrowing the gap with low-cost blockchains like Solana, but may also double their profit margins. This enhancement has the potential to alleviate the current demand for external data availability services by Layer 2, reducing costs and playing a role in maintaining Ethereum's value accumulation. The Dencun upgrade is Ethereum's proactive response to existing challenges in its ecosystem and could have far-reaching implications for the entire blockchain industry.
Valuation: Assessing Ethereum's valuation six months from now is not an easy task, especially considering the significant gas fee reduction expected with the Dencun upgrade on March 13 and the potential approval of the ETF in May. We are optimistic about Ethereum becoming the world's largest smart contract leader and leading the digitization of traditional finance. We will monitor TVL and income changes after the Dencun upgrade to determine its valuation. |
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Post time 14-3-2024 07:03:22