Analysis of the impact of upgrade “Dencun” on Ethereum supply = CoinShares

Impact on Ethereum Supply
Luke Nolan, who is conducting research on Ethereum (ETH) at CoinShares, a cryptocurrency investment company, analyzed the impact that Ethereum’s next upgrade, ‘Dencun’, will have on supply. did. The Rock, which received a tip from him, reported on the 22nd.
Nolan analyzed that the amount of Ethereum burned can be reduced by implementing ‘Proto-Danksharding’, which is attracting the most attention in Denkun. However, he said he was not worried about Ethereum’s rapid token inflation.
Connection: What are the importance and benefits of Ethereum’s next upgrade, “Dencun”?
Protodunk sharding is not a feature that directly affects Ethereum supply. The main purpose of implementing this feature is to reduce the transaction cost of data transfer from L2 to L1.
The reason why Nolan believes this feature could affect burns and supply is because implementing Protodenc sharding lowers transaction fees (gas fees), increasing the likelihood of burns occurring. This is because the basic commission (base fee) is also reduced.
He pointed out that 90% of the gas fees currently paid by L2 are being used for data called ‘call data’.
Protodunk sharding lowers gas costs by replacing call data with data called “blobs,” so if each L2 network supports Protodunk sharding, base fees remain low and stable. It is stated that the amount burned may be reduced.

What is L2?
Abbreviation for “Layer 2”, which refers to a “second layer” network. If all transactions are processed on the main chain, the load will increase, slowing down processing speed and increasing network fees. By performing some transactions at L2, it is expected that the load on the main chain will be reduced and processing speed will be improved.
Cryptocurrency Glossary

Connection:What is blockchain layer 2? Types, points of interest, general network description
When will it be implemented on mainnet?
On the other hand, even if Protodunk sharding causes gas prices to fall and burns to decrease, demand for Ethereum itself will increase, so the impact of this feature on circulating supply will be limited.
The key to ProtoDunk sharding is to lower network costs, and as gas prices drop, the number of users is expected to increase, leading to an increase in transactions.
He also expressed the view that Dencun will help increase Ethereum’s market share in the long term, even if gas prices fluctuate in the short term.
Connection: “Ethereum is expected to surpass Bitcoin’s growth rate” JP Morgan forecast for next year
Currently, Ethereum is experimenting with Dencun on the testnet “Goerli” and plans to experiment with Dencun on two testnets called “Spolia” and “Holesky” in the future. Sepolia is scheduled to be upgraded on January 30th, and Holsky is scheduled to be upgraded on February 7th.
Nolan said Ethereum developers hope to implement Dencun on the mainnet a month after Holesky, with mainnet implementation expected as early as March. However, he said, it is difficult to predict the exact timing because plans may change if bugs or other problems are discovered.
Connection: Ethereum begins testing the next upgrade “Dencun”.
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