Ethereum Layer 2 Tokens See Increased Interest Ahead of Dencun Upgrade

• Ethereum sidechain Gnosis Chain completed its Dencun upgrade on March 11th and can now send blobs .
• Traders eye Layer 2 tokens such as Arbitrum (ARB), Optimism (OP), Lido DAO (LDO), and Metis after expected drop in gas fees on their respective L2s.
• The Dencun upgrade adopts proto-danksharding, increasing scalability and reducing gas fees. 

Earlier today, Gnosis announced that the Dencun upgrade is live on Gnosis mainnet. Ether’s (ETH) price is hovering above $4,000, fueled by anticipation surrounding the upcoming Dencun upgrade. With the upgrade set for Wednesday, March 13th the interest in Ethereum Layer 2 (L2) tokens in particular is surging.

The Dencun upgrade, which will adopt proto-dank sharding, is expected to make Ethereum more efficient and secure by scaling the network. This is likely why there is increased interest in Ethereum Layer 2 tokens, which are tokens that are built on top of the Ethereum blockchain but that process transactions on a separate layer. 

Crypto analyst Mike Deutscher has highlighted the significant impact that the Dencun upgrade will have on L-2 tokens and the Ethereum ecosystem as a whole. This upgrade is expected to drastically reduce fees on Ethereum Layer-2s by at least ten times.

Below are the projected gas fees on ETH & L2s after EIP- 4844. 

Source: Mike

Layer 2 tokens are expected to benefit from the increased scalability of Ethereum after the Dencun upgrade. Hence traders eye these layer-2 tokens as constituting a part of lower market cap tokens such as Arbitrum (ARB), Optimism (OP), Lido DAO (LDO), and Metis (METIS), in anticipation of potential gains.

The Dencun upgrade has already been implemented on several Ethereum testnets ahead of its launch on the mainnet this week. This upgrade comes nearly a year after the Shanghai upgrade in April 2023, which enabled users to un-stake their ETH from Ethereum’s beacon chain.