Why should you care about Cancun Upgrade?
On January 12, the U.S. SEC announced the approval of a Bitcoin spot ETF under much expectation. This event was regarded as a milestone and of great significance. However, the crypto market had a mediocre response, and even after that, the price of Bitcoin It began to fall into a downward trend. In the past half month, it fell from a high of $46,000 to below $40,000, a drop of -13%. The effect bubble of the previously amplified ETF incident was burst, and a large amount of capital flowed to other public chains and project protocols with new narratives.
The Bitcoin ETF game has come to an end for the time being, and the market’s attention immediately turned to the Ethereum spot ETF. Current market analysis shows that the probability of approval in May this year is about 50%. Having experienced the strong rise in currency prices during the previous warm-up of Bitcoin ETFs, Ethereum has been deployed in advance, and the opportunity for the next surge in mainstream tokens cannot be missed.
In addition, the next upgrade of Ethereum, the Cancun upgrade, is coming soon. It is expected that this upgrade will be completed as soon as the end of February. The biggest purpose of this upgrade is to expand the Ethereum main chain, enhance the scalability, security and availability of the Ethereum network, improve the TPS of the main chain and reduce gas fees. This is a great benefit to the Ethereum L2 ecosystem and will Drive the vigorous development of L2 ecology.
Based on the above two reasons, this issue will explain the upgrade of Cancun and analyze the beneficial projects.
What is Cancun Upgrade?
The Cancun upgrade is another upgrade to the Ethereum main chain following the Ethereum Shanghai upgrade. The name Cancun comes from the fact that Cancun is a seaside city in Mexico and a world-famous resort. It is one of the cities where the Ethereum Developer Conference (EthCC) is located.
The core problem of Ethereum that the Cancun upgrade will solve is the transaction fees of the blockchain network. In December 2023, Buterin stated in the article Make Ethereum Cypherpunk Again that one of the core reasons why blockchain is currently limited to asset speculation is the rise in transaction fees. High network transaction fees have made people switch from blockchain to Users of the network turned to speculators of the blockchain network. In order to realize the application value of blockchain, the transaction fees of blockchain network must be reduced by another order of magnitude. Even though the emergence of L2 has reduced network fees compared to the Ethereum mainnet, this is not enough.
This Cancun upgrade is expected to provide multiple enhancements to the Ethereum network:
Scalability improvements: The introduction of Proto-Danksharding is expected to increase transaction processing speed and transaction volume, especially benefiting L2 solutions built on the main Ethereum blockchain.
Gas fee reduction: Make transactions more cost-effective by integrating data blobs and activating EIP-4844.
Security advancement: The implementation of EIP-6780 in this upgrade is designed to improve network security measures and provide stronger protection for user data and investments.
Optimized data storage: The implementation of EIP-1153 in this upgrade will lead to more efficient blockchain data storage, improved operations and reduced costs, which will benefit second-tier solutions that rely on simplified data management.
Cross-chain enhancements: EIP-4788 in this upgrade aims to improve the ease of use and security of cross-blockchain interactions and support enhanced interoperability with second-layer solutions.
The core content of the Cancun upgrade is the EIP-4844 protocol - the introduction of Proto-Danksharding, which is an advanced version of Danksharding. This protocol may reduce L2 transaction fees by 10 to 100 times.
Danksharding is a solution. It describes that this solution can design a separate data type Blob for the data returned by L2 (which will be specially used to store the transaction data submitted by L2 to L1), and separate it from the Calldata of Layer1. . In this way, the Blob data type only needs to be able to be accessed and verified by those who need it within a certain period of time. There is no need for the Layer1 execution layer to execute it all, which will greatly reduce the burden on Layer1.
The Proto-Danksharding introduced in the Cancun upgrade is the first step in the comprehensive expansion of Ethereum. The size of each Blob introduced in this stage is 128 KB, and each Ethereum block is scheduled to contain 3-6 Blobs (0.375 MB - 0.75 MB), and will gradually expand to 64 in the future. In comparison, the current data size that each Ethereum block can accommodate is less than 200KB. After the introduction of Blobs, the amount of data that Ethereum blocks can accommodate will be significantly increased. Therefore, Proto-Danksharding will lay the foundation for further realizing complete Danksharing, introducing the separation of block proposers and builders, and implementing data availability sampling.
The specific content of this Cancun upgrade (completed technical improvements):
Introducing Blob transactions: Blob is the abbreviation of Binary Large Object. Blob transactions are a new transaction type that will be used in future sharding.
Introduce all execution layer logic required to implement future full sharding.
Introduce cross-validation logic for all execution and consensus layers required to implement future full sharding.
Implements layering between beacon block validation (i.e. Ethereum layer 2 data) and blob data availability sampling.
Introduces beacon blocks to implement most of the logic required for future full sharding.
Sharing of beneficial projects in Cancun’s upgrade
For this upgrade, it is actually directly beneficial to the entire L2 ecosystem. According to the statistical results of I2fees.info on 2023/12/11, the introduction of Blob has significantly reduced L2’s transaction costs and throughput has been improved to a certain extent. degree of improvement. At the same time, it also further promoted the development of the Restake track and DA track projects. 1.Arbitrum
As the leader of Ethereum L2, Arbitrum is currently the L2 with the most diverse types of protocols. We believe that the reason why Arbitrum can benefit from this upgrade to a great extent is mainly due to the following dimensions:
Large number of protocols: According to incomplete statistics from DeFiLlama, the number of protocols on Arbitrum is approximately 520, far exceeding the 216 of Optimism, which ranks second.
TVL is large: According to L2beat data, Arbitrum’s current TVL is about 10B, accounting for 49.26% of Ethereum Rollup’s TVL.
Large transaction volume: According to L2beat data, the network transaction volume ranking in the past 30 days shows that Arbitrum has a transaction volume of about 28M, ranking second only to zkSync, which has not yet issued a currency but still has a lot of hair-raising activities, and has nearly 3 times the transaction volume. Leading the Optimism Network in volume.
1. Decision
As the leader of Ethereum L2, Arbitrum is currently the L2 with the most diverse types of protocols. We believe that the reason why Arbitrum can benefit from this upgrade to a great extent is mainly due to the following dimensions:
Large number of protocols: According to incomplete statistics from DeFiLlama, the number of protocols on Arbitrum is approximately 520, far exceeding the 216 of Optimism, which ranks second.
TVL is large: According to L2beat data, Arbitrum’s current TVL is about 10B, accounting for 49.26% of Ethereum Rollup’s TVL.
Large transaction volume: According to L2beat data, the network transaction volume ranking in the past 30 days shows that Arbitrum has a transaction volume of approximately 28M, ranking second only to zkSync, which has not issued coins yet and still has a lot of hair-raising activities, and trades at a breakout rate of nearly 3 times. Leading the Optimism Network in volume.
Based on the above three points, Arbitrum, which is firmly in the leading position in terms of magnitude, can obviously reap more dividends from reduced transaction fees. The optimization of TPS is also beneficial to protocols with higher performance requirements such as GMX and GNS on Arbitrum. ecological prosperity. From the perspective of network fundamentals, Arbitrum is undoubtedly one of the biggest beneficiaries of the Cancun upgrade.
Related links: https://app.trendx.tech/project/9785883aeab585b9d12f9b24a06e1418ea0c08e0bf72582dbc2b598ddbe1f3aa
2.Optimism
Different from Arbitrum, Optimism's competition focuses more on the Optimism Super Chain network built based on OPStack. The value of Optimism depends more on the network value of Optimism Super Chain. Since the release of OP Stack, a large number of projects such as Base, Lyra, opBNB, Debank, etc. have built their own L2 based on OP Stack. The upgrade of the OP Stack Bedrock version also further optimizes transaction costs, transaction processing within blocks, node performance, etc., making it more attractive to build L2 based on OP Stack.
If the Cancun upgrade can benefit all L2s at the same time, then the upgrade premium enjoyed by Optimism is the combination of network value brought by all Optimism ecological chains. If the Cancun upgrade can spawn more new L2s, then the upgrade premium enjoyed by Optimism is that more L2 chains may be built using OP Stack, and Optimism will get closer and closer to the ultimate goal of the Optimism SuperChain super ecosystem. Vision.
Related links: https://app.trendx.tech/project/7a3bf1c98845cab6ab81661ea028394676b3ea12519a0b6933d3f5f05ed67237
3.EthStorage
EthStorage is a second-layer solution that focuses on solving the dynamic storage problems of Ethereum. Based on Ethereum's data availability (DataAvailability), it can provide programmable storage at lower storage costs.
Since Blob data can only be saved for a short period of time, there are problems with calling historical data. Then decentralized storage protocols will have a new development channel. At the same time, the L2 expansion plan also needs to use the data availability layer. EthStorage will greatly reduce the storage overhead of large amounts of data on Ethereum, saving costs by 100 to 1,000 times.
Related links: https://app.trendx.tech/project/cbfc7abc27a6874ad22635d668f33b2fe50784a1915d31ee3354a01fd85b9c3c
4.THORChain
THORChain is a decentralized cross-chain AMM trading protocol. The protocol aims to decentralize cryptocurrency liquidity through a network of public nodes and ecosystem products, making its local and cross-chain liquidity available to any individual, product or institution.
As a cross-chain bridge project, this Cancun upgrade mainly benefited from the EIP-4788 and EIP-4844 upgrades. The gas fee and confirmation time of the cross-chain bridge have increased beyond expectations. Considering that a large amount of funds have poured into the BTC chain in the past six months, and due to the recent upsurge in Bitcoin ETFs, these funds may flow into the Ethereum chain again, so this sector will likely gain Alpha gains.
Related links: https://app.trendx.tech/project/2d33768dfa868d7bf0436cd4e272f4e4d10f47ffb12ec24d4fd5dcbbe69ed52f
5. Put
Metis is an Ethereum L2 Optimistic rollup platform developed on the basis of Optimism. Metis provides scalability and high-performance solutions for Ethereum by introducing powerful L2 technology, providing users and developers with a fast, efficient, and low-cost transaction experience.
As the Cancun upgrade brings more L2 explosions, problems such as single points of failure, malicious arbitrage, grabbing MEV value, and censorship of user transaction space caused by centralized sorters may become increasingly serious. It is foreseeable that the competition of decentralized sorters may become the core theme of L2 competition after Cancun upgrade.
Metis may become the first Ethereum L2 to run a decentralized PoS orderer. It has broken the pattern of sorter centralization and supports nodes that pledge at least 20,000 METIS tokens to enter the sorter pool and become sorter operators. The sequencers entering the sequencer pool will be responsible for determining the packaging order of transactions, and at least 2/3 of the sequencer signatures are required to package and upload the data to the L1 main network. In addition, in order to further prevent the sequencer from doing evil, Metis has also introduced the role of a validator to conduct sample surveys on blocks to ensure that the sequencer sorts the transaction sequence correctly.
Related links: https://app.trendx.tech/project/c8524ee946db8adc8d4ba6063d2368657850d4cbc6a374f0fa9f003fe1e90358
6.OwnLayer
The amount of Ethereum pledged continues to increase, and the need for re-pledge has become increasingly prominent. EigenLayer allows users to re-pledge ETH, lsdETH (liquidity-staking ETH) and LP Token in other side chains, oracles, middleware, etc., as nodes and receive verification rewards, so that third-party projects can enjoy the security of the ETH main network Sex, ETH pledgers can also get more benefits.
In addition, EigenLayer announced that it will provide re-pledge services for Cosmos, which not only allows Cosmos to obtain the security of Ethereum, but also opens up a new world of incremental income for Ethereum stakers.
Related links: https://app.trendx.tech/project/106f792d028941e7291b025da0d5b304ba5ed4256470a985bd438ad0aaf057c0
7.KelpDAO
Kelp DAO is a Restaking project made by Stader Lab, an LSD project that supports multi-chains. It belongs to the Liquid-LSD Restaking type mentioned above. Currently, it is open to deposit two LST tokens, Lido’s stETH and Stader’s ETHx. However, due to the current The EigenLayer LST quota is full, so deposits are currently suspended.
Although Stader Lab has issued tokens, Kelp DAO has launched a points system. As its sub-project, Kelp DAO should still launch its own tokens. And we can look forward to the linkage effect between SD (Stader Lab’s token) and Kelp DAO.
Related links: https://app.trendx.tech/project/73360fcfbdd8e716ad66ffd01b1975ea9226f9855a17001dc3353aba0c4ae8d2
8.ether.fi
Ether.fi is a Liquid Native Restaking type product and has received US$5.3 million in seed round financing from BitMEX founder Arthur Hayes. Unlike Lido, ether.fi uses a decentralized, non-custodial approach to realize ETH. pledge, and announced the provision of re-pledge services. Since it is a native ETH re-pledge, it is not affected by the EigenLayer LST limit and can still be deposited, and its mortgage certificate token eETH (wrapping token weETH) is also one of the few with liquidity at present. LRT mortgage certificate token.
9.Celestia
Celestia adopts a modular architecture to deconstruct the blockchain into data, consensus, and execution. At present, most blockchains still bundle consensus and execution functions in one layer, and build smart contracts on this layer. And users being tied into this execution environment greatly limits the potential for optimization and specialization for specific use cases.
Celestia’s modular architecture places the execution layer on its own blockchain, allowing optimization and specialization for specific use cases. Any developer building a decentralized application based on this architecture will enjoy more complete security and scalability based on the original blockchain execution layer. And in the Celestia modular blockchain, data availability sampling is possible, which allows nodes to verify a block with a very small sample, and at the same time, devices with lower hardware configurations can be used as nodes, such as home computers and mobile phones. wait.
Related links: https://app.trendx.tech/project/deeedb71831dd0328cac0fcbea004e9d6c91c2af677c17a5db20f0eedb23faab
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