Cancun Upgrade Turning Point of Ethereum Layer 2 and Five Potential Investment Opportunities

Source: BITWU.ETH, Crypto KOL
Recently in the $ETH space, many friends have inquired about the latest developments regarding Ethereum Cancun upgrade:
What is the Cancun upgrade and EIP-4844
Impact of the Cancun upgrade on L2
Technical progress of the Cancun upgrade
Disruption caused by the Cancun upgrade
5 investment opportunities beyond Etherum
1. What is the Cancun upgrade
Ethereum Cancun is an additional upgrade to the ETH blockchain following Shanghai, featuring EIP-4844 and possibly EIP-6969, primarily aimed at achieving lower costs and faster speeds for Ethereum L2: this will increase the speed of Ethereum Layer2 by 10x, with a chance of even 100 times faster and lower cost.
2. Core of the Cancun upgrade: EIP-4844
What is EIP-4844?
This is the first step in ETH L1 expansion Pro-Danksharding, also known as EIP-4844. EIP-4844 introduces a new transaction type Blob, moving transaction data to a new temporary “blob” storage to provide cheap storage costs without the need for permanent storage.
Previously, L2 would periodically store some data on the L1 main chain, which consumed a significant amount of fees. After the Cancun upgrade, L2 transactions will be stored in a blob, similar to Ethereum L1’s “external storage space,” with cheaper storage costs and larger space. The core of the Cancun upgrade is to reduce storage costs.
3. The Cancun upgrade will stimulate the explosion of L2 ecology
More than 90% of the transaction costs paid by users in L2 Rollups are due to data storage. After the full implementation of EIP-4844, the transaction costs of L2 will be reduced by an order of magnitude, making each L2 transaction cheaper by several tens of times.
Therefore, the significance of the Cancun upgrade is no less than that of the Shanghai upgrade. With the cost reduction of L2 Rollups, possibly even lower than <$0.001, and this is just the impact brought by the first step of ETH expansion upgrade. Since the launch of OP and Arb, the TVL and network activity of these two Op Rollups have already ranked in the top 4 and top 6 of the public chain rankings. With the significant reduction in costs brought by the Cancun upgrade, the space and influence of L2 will be greatly enhanced. Lower transaction costs, better transaction experiences, and the emergence of more application scenarios will make the Cancun upgrade a turning point for Ethereum L2. 4. Summary of the current technical progress and stages of the Cancun upgrade In 2023, there have been a total of 18 discussions (as of May 10, 23) @KiwiCryptoBig Tweet discussions related proposals and possible progress, summarized below by @KiwiCryptoBig : The Shanghai upgrade was delayed for a long time, and the current development workload of Cancun is also significant, estimated to be later than the roadmap. In the coming weeks, the development scope should be clear, various minor upgrades may have to make way for 4844, and it is estimated that some EIPs in the current discussion scope will be squeezed out. The blob brought by 4844 is highly likely to be useful, benefiting various large, medium, and small L2 and modular blockchains. 5. Resonance between the Cancun upgrade and BTC halving, shaking up the situation in the second half of the year The Cancun upgrade currently does not have a specific time frame, likely in the second half of 23, while the next BTC halving will be on May 9, 24. Halving expectations are often speculated in advance, coinciding with the Cancun upgrade in the second half of the year, a new round of reshuffling may be on the horizon. Impact on L1 chain: Only Op and Arb have been dominant in the public chain market, with Arb TVL second only to TRON and BSC, and Op weaker than Arb but still making it to the top 6, outperforming previous star public faces like Avax, FTM, Sol, etc. After the Cancun upgrade in the second half of the year, the competitive advantage of ETH L2 will be increased by an order of magnitude, making it increasingly difficult for non-ETH public chains, with most likely being eliminated by the market. Competition within L2: Arb and Op have dominated the L2 market with their first-mover advantage, but as the Cancun upgrade approaches in the second half of the year, the entire Rollup race will see a general bullish trend. The competition between L2 solutions and within the same solutions will become increasingly fierce, with the possibility of new dark horses emerging. 6. In addition to ETH itself, 5 investment opportunities worth considering under the Cancun upgrade No.1: L2 leaders - Arb, Op These two are the current leaders in TVL and users in L2, with enough first-mover advantage and legitimacy, already having a certain ecological moat, making them the core targets of the Cancun upgrade. No.2: Leading applications - GMX, RDNT, Magic, Velo, Snx GMX, RDNT, Magic are part of the Arb system, while Velo, Snx are part of the Op system, each receiving support from the corresponding L2. The outbreak of L2 will also drive the explosion of their ecosystem. No.3: Alternative L2 - Polygon. Polygon is a side chain with its independent consensus, not considered L2, but Polygon has several ZK Layer2 solutions, including Polygon ZKEVM. Polygon is transitioning from the public chain market to embracing ETH L2, with strong technical capabilities and market driving force. No.4: zkRollup projects - LRC, IMX Currently, the general zkRollup has not issued coins, with LRC, IMX being the easier sectors to speculate on in the ZK L2. No.5: Optimism Forks - Boba, Metis Lack of legitimacy, but similar performance, weaker ecosystem, higher odds, marking the end block of the Cancun upgrade. Mentioned image sources This article has been authorized for reprint from the BlockBeats self-discipline.