With the completion of the Dencun Upgrade, Ethereum and its associated ecosystem tokens are showing robust performance. Additionally, the launch of mainnets by modular projects and Ethereum Layer-2s further reinforces market confidence in the Ethereum ecosystem. The narrative of liquid restaking (LRT) has started to attract capital flows with the surge of EigenLayer projects. However, is the path of ETH -> LST - > LRT a catalyst for the Ethereum ecosystem or merely a nesting doll as most people claim?

The recent Dencun upgrade on Ethereum has led to a decrease in transaction costs on layer 2 solutions such as Optimism and Base. This is due to the introduction of Binary Large Objects (blobs), which allow for the storage of large data chunks off-chain and at a lower cost than call data. Rollups like Optimism, Arbitrum, and zkSync have implemented blobs manually, leading to a significant drop in transaction fees. The blob mechanism is expected to eventually result in a 90% decrease in transaction costs on layer 2 solutions, but it has not yet boosted investor interest in the native tokens of rollups.

The highly anticipated Ethereum Dencun upgrade was successfully deployed on the Ethereum mainnet on March 13th, resulting in a significant drop in gas fees for Ethereum-based Layer 2 platforms within 24 hours. The integration of EIP-4844 has led to notable reductions in transaction fees across various Layer 2 networks, with average and median fees dropping during a specific hour. The introduction of blobs to the Ethereum ecosystem is seen as a catalyst to invigorate the network and coincide with the influx of new users, providing them with an opportunity to engage with Ethereum without encountering high transaction fees. While fees on blob-enabled Layer 2 solutions are currently low, it is expected that they will gradually increase over time as demand for blobs grows.

As shown by Etherscan data, the Ethereum Dencun upgrade is expected to be activated on the Ethereum mainnet in 1.5 hours, with the current epoch being 269553. The name "Dencun" comes from the combination of the Ethereum execution client Cancun upgrade and the consensus client Deneb upgrade. The main goal of the upgrade is to improve the scalability and modularity of the Layer 2 network, enhance the security function of the Ethereum network, and improve overall usability. The most watched proposal is EIP-4844 (Proto-Danksharding), which is the pre-plan for the complete version of sharding expansion Danksharding. The entire sharding plan is based on Rollup for on-chain expansion, aiming to expand Layer 2 Rollup, reduce fees and increase throughput for Layer 2, and pave the way for complete sharding. According to data previously released by the Ethereum Foundation, Dencun is expected to be activated on the Ethereum mainnet at 21:55 on March 13th Beijing time, with epoch 269568.

Gnosis Chain has introduced blobs, a new approach to enhancing data handling capabilities on the blockchain, ahead of Ethereum's upcoming Dencun upgrade. The upgrade includes Ethereum Improvement Proposal (EIP) 4844, which introduces blob transactions to address the high costs and inefficiencies of current data storage methods on the blockchain. By integrating blobs, Gnosis Chain is addressing scalability challenges and laying down a foundational component for Ethereum's upgrade. The integration of blobs is expected to significantly reduce costs associated with posting data on the Ethereum blockchain, making layer-2 solutions more accessible and efficient.

According to official sources, Bybit has announced its support for the DenCun upgrade and plans to temporarily suspend all token deposit and withdrawal services via Ethereum, Arbitrum, Optimism, ZKFair (ZKF), Linea, Manta Network (MANTA), zkSync Lite, zkSync Era, Starknet (STRK), Polygon (MATIC), and Mantle networks starting from 1:55 pm UTC on March 13th.

According to official sources, Crypto.com announced that it will support the Ethereum Dencun upgrade and plans to suspend token deposits and withdrawals on affected networks on its app and trading platform at UTC time 13:25 on March 13. The affected networks include Ethereum, Arbitrum One and Arbitrum Nova, Optimism, zkSync Era, and Polygon Pos. However, related token transactions will not be affected.

ZK interoperable infrastructure Polyhedra Network has released an update for zkBridge: it will support the Ethereum Dencun network upgrade.

Fidelity Digital Assets stated in a research report on Wednesday that the Ethereum network's Dencun upgrade plan will be implemented on March 13. This is the first step in achieving its Rollup-centric roadmap, which will enable the network to serve as a database suitable for L2 chains, allowing data to be stored more efficiently and cheaply.Analyst Max Wadington wrote: "Improvements to Ethereum as a database provide L2 users with the opportunity for near-zero transaction fees," which could attract more users. The report believes that this upgrade will provide the scalability needed to support millions of users on L2 chains, making it a "distributed database more suitable for other chains." The report expects these improvements to bring more users to the Ethereum ecosystem and expand the network's total addressable market (TAM).

The Ethereum mainnet will undergo its largest upgrade since the Shanghai upgrade, known as the Dencun upgrade, on March 13. Ethereum validators and node operators have been advised to update their software to the latest versions, while ordinary ETH users will not need to perform any updates unless informed otherwise. The Dencun upgrade includes several changes, with the most notable being the introduction of data blobs to help reduce transaction fees on Layer Two networks. The implementation of the Dencun upgrade is expected to have a positive impact on the ETH price, which is already showing signs of breaking out of a macro bearish trend.