Bitcoin is not the only cryptocurrency that has suffered a radical price jump that has caused it to hit an unprecedented level of $73,000 due to a massive inflow of institutional money.
The second largest crypto token ETH (run on Ethereum blockchain) also exhibited a 40 percent spike in the past month alone.
The key reason for this jump is believed to be the highly anticipated Dencun blockchain update. Ethereum developers have been eagerly awaiting the Dencum blockchain update, the biggest code change in over a year.
Ether was trading at $3,980 at 16.00 IST, 1.66 percent lower than a day earlier.
What is the Dencun update?
Dencun is a portmanteau of the project name Deneb + Cancun. This consists of two updates happening together on Ethereum’s consensus and execution layers. Dencum update, a hard fork in blockchain terminology, was finalized at 7.40 pm IST.
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In the run up to this update, ether rallied as much as 43 percent in the past month, as the image below shows.
How will it help investors?
One of the main benefits that investors can expect with a Dencun upgrade is the reduction of transaction costs on layer 2 networks.
The average transaction costs of layered solutions such as Optimism and Basis fall after the Dencun upgrade, reported CoinDesk.
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The average cost of transactions on Optimism has dropped to about 4 cents from the recent average of about $1.4, CoinDesk wrote, citing blockchain analyst Marcov’s Dune-based tracker. The average fee on Coinbase’s layer 2 settlement Basis fell to 3 cents from about $1.50, while Arbitrum fell to 40 cents, the report further said.
So, apart from the price spike exhibited by Ether, layer 2 tokens are also likely to witness a jump in their prices after the upgrade.
“The market is optimistic about Dencun update. On CoinSwitch ETH trading volume increased by 340 percent this quarter compared to 2023 and Layer 2 tokens are also in demand: Arbitrum vol increases by 400 percent, Optimism by 411 percent, and MATIC ( Polygon) by 200 percent,” says Ashish Singhal, co-founder, CoinSwitch.
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Published: 14 Mar 2024, 16:24 IST