Coinbase's Ethereum layer-2 network, Base, experienced a massive increase in daily transactions and user registrations after the Dencun upgrade, with transactions soaring from 440,000 per day to over 2 million. Meanwhile, Solana outperformed Ethereum in total trading volume over the weekend, driven by the popularity of new memecoins, despite facing network challenges that led to failed transactions.
Base Records 2 Million Transactions a Day
Coinbase's Ethereum layer-2 network, Base, has seen a dramatic increase in daily transactions and user registrations after the recent Dencun upgrade, which greatly reduced transaction fees on the platform. Before the upgrade, Base was processing about 440,000 transactions per day, a figure that soared to 1.1 million the day after the upgrade and reached a record 2,064,920 transactions on Mar. 16. Alongside the surge in transactions, the number of new users on Base also spiked to 666,866 on the same day, an increase of 3,200% from the days leading up to the upgrade.
This huge growth in activity on Base is attributed to the reduction in transaction fees after the Dencun upgrade. The upgrade introduced EIP-4844, which incorporated data blobs or proto-danksharding to the network, enhancing layer-2 data availability and cutting gas costs by up to 90% for some networks. As a result, average transaction fees on Base have plummeted by more than 60%, a trend that is mirrored across other leading layer-2 networks including Arbitrum, Optimism, and zkSync Era, with fee reductions ranging between 60% and 90%.
Since its launch in August, Base has quickly become the sixth-largest network within the Ethereum layer-2 ecosystem, boasting a total value locked of $1.46 billion and holding a 4.1% market share among layer-2 solutions, according to L2beat. Despite the impressive growth of Base, Arbitrum and Optimism are still at the forefront of the layer-2 landscape, commanding total values locked of $23 billion and market shares of 42% and 23% respectively.
The reduction in transaction fees has also had quite the positive impact on decentralized applications, with token swap fees on Uniswap's Optimism deployment dropping to as low as $0.01, according to protocol founder Hayden Adams. However, Ethereum layer-1 gas fees remain high, influenced by the asset's price fluctuations, with an ETH transfer costing around $2.1, a USDC transfer approximately $5, and a swap on Uniswap about $16, according to data from Gasfees.io.
What is the Dencun Upgrade?
Ethereum's latest upgrade combines two updates—Deneb and Cancun—into one, targeting improvements across both its consensus and execution layers. This transition, executed via a hard fork at epoch 269,568, is a pivotal advancement in reducing transaction fees for layer-2 solutions and enhancing the scalability of Ethereum. Dencun emerged almost a year after the Shanghai upgrade, which facilitated the unstaking of Ether (ETH).
The upgrade addresses Ethereum's growing concern over high gas fees, with layer-2 solutions previously offering a pathway to scalability but at costs prohibitive for widespread adoption. Dencun introduces proto-danksharding, an interim step towards a more comprehensive danksharding solution, focusing on cost-efficient transaction processing for layer-2 networks like Polygon, Arbitrum, and Optimism. This approach allows for off-chain storage of bulky transaction data, reducing fees and freeing up space on the main network for essential transactions.
Despite a dip in Ether's price post-upgrade, Dencun is seen as a crucial move towards resolving Ethereum's scalability dilemmas The upgrade, primarily facilitated by proto-danksharding through EIP-4844, is designed to lower costs for layer-2 networks by enabling off-chain storage of transaction data. This step not only paves the way for the eventual implementation of danksharding but also enhances the Ethereum network by introducing mechanisms for efficient verification of off-chain data, implementing fee-reduction algorithms, and laying the foundation for the separation of transaction data and processing.
In addition to economic benefits, Dencun significantly boosts the security landscape of Ethereum through the incorporation of EIP-4788 and EIP-6780. These enhancements facilitate better communication between the network's layers and modify the operation of the smart contracts' "SELFDESTRUCT" function, respectively, thereby fortifying the network against potential attacks.
Overall, the Dencun upgrade positions Ethereum for increased adoption by making layer-2 solutions more cost-effective, enhancing the developer experience, and by giving it a competitive edge in the blockchain ecosystem through its focus on scalability, affordability, and security improvements.
Solana Outperforms Ethereum
Meanwhile, Solana could still have an edge over Ethereum. Over the weekend, the Solana network experienced a huge surge in activity, surpassing Ethereum in total trading volume. On Mar. 16, Solana's trading volume reached $3.52 billion, outdoing Ethereum by more than $1.1 billion, according to DefiLlama.
This spike in activity was largely fueled by a growing frenzy around Solana-based memecoins, especially a new memecoin called Book of Meme (BOME) and another named “$NAP” (NAP). BOME saw its market cap soar to $1.45 billion in just 56 hours of its release, while NAP's market cap jumped to over $330 million in less than 18 hours.
However, the network did face some challenges handling the increased traffic, with users reporting frequent failed or missing transactions. Validator data indicated that ping times on Solana stretched between 20 and 40 seconds at peak times, leading to around 50% of transactions failing for some time on Mar 16.
During this heightened activity, the price of SOL also experienced an increase. At press time, SOL was worth $202.12 after its price saw a 9.27% rise throughout the past day of trading. This rally also propelled Solana's market cap to $89 billion, allowing it to overtake Binance's BNB coin as the fourth-largest cryptocurrency by market cap.
