Get 40% Off
💰 Buffett reveals a $6.7B stake in Chubb. Copy the full portfolio for FREE with InvestingPro’s Stock Ideas toolCopy Portfolio

Ethereum upgrade set to reduce Layer 2 fees and boost throughput

EditorHari G
Published 11/26/2023, 09:15 PM
© Reuters.

The Ethereum network is poised for a significant upgrade with the introduction of EIP 4844, which aims to dramatically reduce transaction fees on Layer 2 (L2) solutions by as much as sevenfold. This development is a strategic move to address the challenge of achieving global ubiquity by increasing data bandwidth within the network.

According to expert Ryan Berckmans, the upgrade is expected to result in a more efficient market for data storage, known as "blob market clearance," and enhance network throughput by six times. Importantly, these improvements will be achieved without impacting gas costs on Layer 1 (L1), ensuring that execution costs remain stable.

The activation of EIP 4844 is scheduled for the first quarter of 2024, a timing that aligns with anticipated bullish market conditions. This upgrade is part of Ethereum's ongoing efforts to scale the network and improve its functionality. In addition to EIP 4844, there are proposals like RIP-7560 focused on native account abstraction for L2s, which would necessitate updates to smart contract account mechanisms to optimize rollup functionality.

This series of upgrades represents a concerted effort by Ethereum developers to enhance the blockchain's performance and user experience, particularly in terms of efficiency and cost-effectiveness. As the platform continues to evolve, these advancements are expected to further solidify Ethereum's position as a leading blockchain for smart contracts and decentralized applications.

InvestingPro Insights

The anticipated enhancements to the Ethereum network with the introduction of EIP 4844 are expected to bolster its market position, potentially impacting its financial metrics positively. The InvestingPro data reflects a strong financial performance with a market capitalization of 1.52 trillion USD, indicating the vast scale of Ethereum's reach in the market.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

InvestingPro Tips suggest that the upgrade may lead to increased network efficiency and reduced transaction costs, which could further drive revenue growth. The network's revenue growth over the last twelve months as of Q3 2023 stood at 10.32%, with a more pronounced quarterly growth rate of 12.57% in Q3 2023, showcasing a robust upward trend.

Moreover, the gross profit margin of 46.24% signifies a healthy profitability level, which could be enhanced as transaction fees decrease, potentially attracting more users and applications to the platform. With a price close to its 52-week high at 99.32% of the peak value, investor confidence appears to be strong. Ethereum's next earnings date is set for February 1, 2024, which could provide further insights into the financial impact of the upcoming network upgrades.

For investors seeking a deeper dive into Ethereum's financials and future prospects, InvestingPro offers additional tips, with a current list of 25+ InvestingPro Tips available to subscribers. With the special Black Friday sale, investors can now access these insights with up to a 55% discount on the InvestingPro subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.