What substantial benefits will the Ethereum Cancun upgrade bring?

23-05-23 16:00
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Original title: "What substantial benefits will the legendary Ethereum Cancun upgrade bring?"
Original source: "Plain Language Blockchain"


Recently, BRC20 has been on fire, and Bitcoin, which focuses on value storage, has an even hotter ecosystem than Ethereum. However, don't forget that when it comes to ecosystems, Ethereum is the true king, because Ethereum is quietly brewing the next major upgrade. On April 13th, Ethereum successfully completed the Shanghai upgrade, and the ETH mainnet opened for withdrawals and flexible access, completing a major step for Ethereum's transition from POW to POS. However, this has brought some selling pressure in the short term, so ETH is currently in a weak adjustment state.


Source: nansen


Every important upgrade of ETH is often a hot topic in the industry and brings opportunities for rapid development to some tracks, such as the upgrade in Shanghai which ignited the LSD track and generated excess returns in the first quarter. So what is the next important ETH upgrade?


History of ETH upgrades


A Ethereum upgrade often means the emergence of new features, adjustments to some parameters, or improvements in security. However, Ethereum upgrades are also divided into active upgrades and passive upgrades. Active upgrades are easy to understand, and upgrade activities are carried out according to the intentions of developers. But passive upgrades are actions that have to be taken, mainly to deal with potential security risks.


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Before the Ethereum merger in September of last year, ETH underwent 14 upgrades, including the famous passive upgrade of the DAO Fork incident in 2016. Due to the theft of ETH raised by the DAO project, the ETH fork event was triggered, ultimately resulting in the fork of Ethereum Classic (ETC).


Important upgrades in recent years


2020.8.5, London Upgrade, introducing the EIP-1599 proposal, adding ETH burning and dynamically adjusting the Base Fee for each transaction.


2022.9.15, Paris Upgrade, Ethereum's consensus mechanism transitions from POW to POS, marking the end of the era of machine mining.


After the upgrade in Shanghai, the most important upgrade this year is the Cancun upgrade. In the latest Ethereum core developer meeting, it was announced that the Cancun upgrade is expected to take place later this year. Why is the Cancun upgrade important, what are its contents, and what development opportunities will it bring? The following text will answer these questions one by one for everyone.


Kankun Upgrade Content and Impact


Following the tradition of using the name of the city where devcon (Ethereum Developer Conference) is held for upgrades, the next Ethereum upgrade will be called the Cancun upgrade, which will take place in Mexico.


1. Upgrade Content


According to the summary of the 160th Ethereum Execution Layer Core Developer Meeting (ACDE), the following content has been included in the upgrade scope:


The protagonist of the upgrade EIP-4844:


EIP-4844 aims to provide temporary storage and retrieval of off-chain data through Ethereum nodes to meet the data and storage needs of blockchain applications. If successfully activated, EIP-4844 is expected to reduce the cost of layer 2 rollup solutions. It is reported that EIP-4844 has been tested on four development networks. During the conference call, developers announced the launch of the fifth test network.


EIP-4844 was originally scheduled to be upgraded in Shanghai, but was ultimately postponed to Cancun.


Developers also agreed to include the following EIPs in the upgrade:

·EIP-6780 (Preparation for Verkle Tree in Future Applications);

·EIP-6475 (providing better readability and compact serialization);

·EIP-1153 (Introducing the Transient Storage Opcode).



These proposals provide some assistance to ETH in achieving more complete functionality.



Principle:


The essential purpose of Ethereum's expansion is to increase data processing capacity and processing speed. Currently, there are two directions being pursued simultaneously: layer2 rollup and the shard scheme for the main network. The complete shard scheme is divided into three steps, with EIP-4844 being the first step.


The principle of Rollup has been discussed many times before, so I won't go into it again here. The main purpose of the mainnet's sharding is to split the data that needs to be stored on the mainnet, saving space and allowing for flexible access to temporarily store and retrieve the required data. It's like watching a video. Previously, all the videos had to be downloaded and searched for when you wanted to watch one, but many of the videos may not be needed, taking up a lot of memory and causing the system to crash. Now, it's like a video website where you can simply click on the video you want to watch, temporarily caching it and saving space.


Before the upgrade in Cancun, L2 information was stored in the Calldata of L1 information. However, this method is costly and the space in Calldata is limited.


After the upgrade in Cancun, L1 will be stored in a new location called "Blob". Blob storage is low-cost and has more space. This allows Ethereum to carry more data, improve Ethereum's TPS, and reduce costs. Since Blob is a temporary data package, it is cleared once every fixed number of days (currently 30 days), so nodes only need to download a fixed amount of data for one month, reducing the burden on nodes.


The upgrade of Cancun will make L2 cheaper and faster. This is not only good news for the L2 protocol itself, but also for the ecosystem built on top of L2, which will see faster development.


2. Favorable Track


The first benefit of Cancun upgrade is for L2 protocol and its ecosystem. The OP ecosystem will become more diversified, and the ZK ecosystem will become more available due to enhanced data availability. Additionally, more independent layer 2 solutions that were previously difficult to operate due to high costs will experience rapid growth.


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On-chain futures DEX: GMX, GNS, etc.


Before the flourishing of L2, on-chain futures DEX has been limited by the low TPS of Ethereum. Because leveraged trading pairs require higher speed, there has been no good development before. With the gradual construction of the L2 ecosystem, GMX, GNS and other projects have risen rapidly, and soon GMX became the project with the highest TVL on Arbitrum. In the future, with the landing of the Kankan upgrade, on-chain futures DEX will further develop.


According to the data from WFE (World Federation of Exchanges), the trading volume of derivatives far exceeds that of spot in mature traditional financial markets. As the current leading derivative protocol, on-chain futures DEX still has great development potential.


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Decentralized options exchange: dopex and more


Options are the most commonly used trading tool for institutional users. According to data from the WFE (World Federation of Exchanges), 60% of the trading volume in derivative orders in traditional financial markets is options. Therefore, once the Cancun upgrade is successful, the development potential of on-chain options is even greater. However, it has been limited by low capital utilization efficiency, and after the infrastructure is improved, there will be more outstanding applications.


Optimism and its ecosystem


Optimism's current ecosystem development is second only to Arb, and with the support of Coinbase, its development potential should not be underestimated.


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Currently, there is no Token issued Zk rollup protocol.


Currently, the Op series is leading and occupies the vast majority of the market. However, ZK has enormous potential, and the timing of its outbreak may be when Ethereum implements full sharding.


Zksync: The leading ZK series Layer2 protocol, which has recently been launched on the mainnet. It is more recognized and advanced in the industry for its ZK series solutions.


Starknet: The use of STARKs differs from Zksync's proof method and is advantageous for processing large orders, but has poor compatibility.


已发 Token 的 Zk rollup 相关协议:
Protocols related to Zk rollup for issued tokens:


Dydx: The DeFi representative application of Ethereum Layer2, and the leading derivative DEX.


Loopring: Token IRC, launched at the end of 2019, is more like an application than a network. It supports DEX, NFT orders, and more.


Immutable: Token IMX, a Layer 2 solution that facilitates the exchange of gaming NFT assets.


Cross-chain track: layerzero and others.


Layer 2 essentially operates as a multi-chain, so the cross-chain protocol layerzero is also highly regarded. It is currently the hottest cross-chain protocol and is detailed in the article "Who is the next worthy target for the "Wool Party" and which "Big Mao" is worth paying attention to?" Its competitors include well-known projects such as DOT.


DA Track


Due to the short-term storage limitation of Blob data, there are issues with accessing historical data. Therefore, decentralized storage protocols will provide a new avenue for development, and Layer2 scaling solutions will also need to utilize the data availability layer.


Good news for L1 storage expansion networks, such as Eth storage. It is a solution focused on solving Ethereum's dynamic storage problems. Based on Ethereum's data availability, it can provide a programmable storage layer solution at a lower cost. EthStorage will greatly reduce the storage costs of large amounts of data on Ethereum, saving 100 to 1000 times the cost.


Summary


Cancun upgrade is an important upgrade for Ethereum, which is no less important than the Shanghai upgrade. It opens a new chapter for Ethereum L1 sharding, reduces the transmission cost between L1 and L2, and achieves lower gas fees and higher TPS, which directly benefits the L2 and other related ecosystems. Ethereum's competitiveness will be further strengthened.


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