The Ethereum Foundation recently announced the deployment date of the Dencun upgrade on the main chain. Scheduled for March 13, 2024, this long-awaited hard fork will lead to significant structural changes to the Ethereum network.
Ethereum, the technical improvements made by Dencun
On a technical level, Dencun introduces several notable new features on the Ethereum blockchain:
- Moving to proof-of-stake consensus to validate blocks, replacing energy-intensive mining with validators. This is a fundamental change to the protocol, which puts an end to the intensive use of computing power to secure the network, in favor of a system based on holding ETH.
- Vastly reduced transaction fees, divided by 100 thanks to Dencun. The Ethereum network becomes much more affordable for end users and improves its competitiveness compared to competing blockchains.
- Better scalability obtained via enlarged blocks and solutions such as sharding. The goal is to support 100,000 transactions per second compared to only 15 currently. This increase in capacity is crucial for Ethereum to meet growing demand.
- Strengthened security thanks to new EVMs and “proto-danksharding”. These technical changes will make smart contracts and transactions on Ethereum more robust against exploits.
These technical improvements prepare Ethereum to accommodate many more users and decentralized applications. They are significantly modernizing the infrastructure to make it more efficient, secure and scalable.
The economic impact of the hard fork
In addition to its technical implications, Dencun will also have significant economic repercussions on Ethereum:
- End of the issuance of new ETH via mining, replaced by only 900 ETH created each day. This drastic reduction in native inflation of the network reinforces the scarcity of Ethereum (ETH) and favors the rise in its price, by suppressing mining sales.
- Destruction of transaction fees, made possible by the EIP-1559 mechanism. This mechanically reduces the total number of ETH in circulation when network activity is sustained. A positive deflationary impact.
- Announced end of the triple halving of the show with each major fork. Dencun will be the last fork to divide the emission by 3. In the long term, ETH becomes an increasingly rare asset.
- Staking rewards encouraging ethereum holders to participate in securing the network, with an estimated return between 5 and 15%. A much less inflationary model than mining.
With its Dencun upgrade, Ethereum enters a decisive new technical and economic era on March 13, 2024. These fundamental changes place the blockchain in an ideal position to become the reference infrastructure for Web3 and decentralized finance. The expected positive impact on the value of ETH is also attracting great interest from investors.
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