Ethereum has recently launched its most significant upgrade in over a year, known as Dencun. This upgrade brings a new transaction model called blobs, aimed at optimizing data usage on the world’s second-most-valuable blockchain.

The upgrade, deployed on Wednesday around 10 a.m. EDT according to blockchain records, focuses on reducing transaction fees for Layer 2 blockchains built on Ethereum. These Layer 2 networks, also called rollups, process transactions independently and sync with the main Ethereum network periodically. Their faster speed and lower costs compared to Ethereum make them attractive for application users.

Previously, Layer 2 networks stored data directly on Ethereum, leading to high operational costs. With the introduction of blobs, a temporary data storage solution retaining data for about three weeks, Ethereum aims to decrease transaction costs for all Layer-2s.

Lower transaction costs are expected to boost the growth of blockchain-based applications like games, financial exchanges, and social networks. This upgrade enables developers to create decentralized applications that were previously impractical.

Despite the benefits, some Layer-2 developers are cautious about the economic aspects of the upgrade. Gas fees on Ethereum have been volatile, and teams are preparing for changes gradually to ensure smooth implementation.

While the upgrade had a positive impact on Ether’s value initially, the price stabilized around $3,948 post Dencun. The impact of the upgrade may vary across different Layer-2s, with zero-knowledge-rollups like Polygon, StarkWare, and zkSync expected to benefit more compared to optimistic roll-ups.

Overall, the Dencun upgrade marks a significant milestone for Ethereum, paving the way for the development of new decentralized applications and reducing transaction costs for Layer 2 blockchains.

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