In March 2024, Ethereum successfully implemented the Cancun Upgrade, introducing Blob transactions via EIP-4844. This upgrade significantly reduced transaction fees on Ethereum’s Layer2 networks.
This article explores the key aspects of the Cancun Upgrade and its implications for Ethereum investors.
What Is the Cancun Upgrade? Why Was It Necessary?
Like smartphones running on iOS or Android, Ethereum is a sophisticated operating system powering countless blockchain applications.
Each upgrade enhances Ethereum’s performance—whether by improving functionality or reducing operational costs.
According to the Ethereum Foundation’s roadmap, upgrades follow four core principles:
- Cheaper transactions
- Enhanced security
- Better user experience
- Future-proofing
Since its launch, Ethereum has undergone 22 upgrades, each named after a global city. The Cancun Upgrade (Dencun)—named after Mexico’s famous tourist destination—was completed on March 13, 2024.
The upgrade included multiple improvements, referred to as Ethereum Improvement Proposals (EIPs):
- EIP-4844: Introduced Blob transactions (most impactful)
- EIP-1153
- EIP-6780
- EIP-4788
- EIP-5656
- EIP-7516
For the Ethereum community, Cancun was the most anticipated upgrade since The Merge (2022). Below, we break down EIP-4844—its centerpiece—and its effects on ETH’s ecosystem.
Impact of the Cancun Upgrade
While the upgrade introduced many changes, the most noticeable outcome for users was: Layer2 gas fees dropped dramatically.
Ethereum’s Scalability Challenge
Ethereum’s original design processed only ~15 transactions per second (TPS), with each requiring a gas fee—similar to a highway toll.
During peak usage, this led to congestion and sky-high fees. Users could either wait or pay exorbitant fees to “skip the line.”
👉 How to optimize gas fees for Ethereum transactions
Layer2: A Partial Solution
By 2021, Layer2 networks emerged to alleviate congestion. These chains:
- Remained compatible with Ethereum.
- Reduced operational costs.
However, fees only shifted from “very expensive” to “moderately expensive” (~$0.6–$1.5 per transaction). A significant portion went to Data Availability (DA) costs—Layer2 batches transactions and sends them back to Ethereum, incurring fees.
EIP-4844: The Game Changer
The Blob-carrying transactions introduced in EIP-4844 slashed these fees. Post-upgrade:
- Most Layer2 networks saw ≥50% fee reductions.
- Chains like Optimism reported fees as low as 1/100th of pre-upgrade costs.
What Does the Cancun Upgrade Mean for ETH Investors?
The upgrade primarily benefits Ethereum’s Layer2 ecosystem, advancing its goal of mass adoption.
However, ETH’s price peaked on upgrade day and later corrected—a pattern seen after past upgrades (“buy the rumor, sell the news”).
Ethereum’s Long-Term Roadmap
Vitalik Buterin outlined six development phases for Ethereum:
| Phase | Focus |
|---|---|
| The Merge | Transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). |
| The Surge | Scalability via rollups and data sharding. |
| The Scourge | Addressing MEV, censorship resistance, and decentralization. |
| The Verge | Simplifying block verification. |
| The Purge | Reducing node operation costs. |
| The Splurge | Miscellaneous upgrades. |
The next major upgrade, Prague (EIP-3074), will focus on user experience.
FAQs
1. How does EIP-4844 reduce fees?
- By introducing Blob transactions, which minimize Data Availability costs for Layer2 networks.
2. Will ETH’s price rise after Cancun?
- Short-term gains may have already been priced in. Long-term growth depends on adoption and future upgrades.
3. Which Layer2 networks benefit most?
- Optimism, Arbitrum, and other rollup-based chains saw the largest fee reductions.
4. What’s next for Ethereum?
- The Prague Upgrade (EIP-3074) will streamline wallet interactions.
5. Is Ethereum a good investment post-upgrade?
- ETH remains a long-term play tied to ecosystem growth—not just upgrades.
👉 Explore Ethereum staking strategies for 2024
Key Takeaways
- The Cancun Upgrade slashed Layer2 fees via EIP-4844.
- ETH’s price often corrects post-upgrade due to profit-taking.
- Ethereum’s six-phase roadmap will unfold over decades.
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