Recently, many friends have asked about the new developments of Ethereum Cancun (Cancun Upgrade) at the $ETH level: This Thread:

1. What is the Cancun upgrade and EIP-4844?

2. The impact of the Cancun upgrade on L2;

3. Technical process of Cancun upgrade;

4. Cancun upgrades disrupt the situation;

5. 5 investment opportunities besides #Etherum.

1. What is Cancun Upgrade?

Ethereum Cancun is an additional upgrade to the ETH blockchain after Shanghai, with EIP-4844 and possible EIP-6969 mainly aimed at pushing Ethereum L2 to achieve the goal of reducing costs and increasing speed: By then, the speed of Ethereum Layer2 will be increased by 10x, and there is even a chance to increase it by 100 times and at a lower cost.

2. Cancun upgrade core: EIP-4844

What is EIP-4844? This is the first step of ETH L1 expansion Pro-Danksharding, also known as EIP-4844. EIP-4844 introduces a new transaction type Blob, which moves transaction data to a new temporary "blob" storage to provide cheap storage costs, and does not need to be permanently saved. Before this, L2 would periodically store some data on the L1 main chain, and this step would consume a lot of fees. After the Cancun upgrade, L2 transactions will be stored in blobs, which are similar to the "external storage space" of Ethereum L1, with cheaper storage costs and larger space.

The core of the Cancun upgrade is to reduce storage costs.

3. Cancun upgrade will stimulate the outbreak of L2 ecology

More than 90% of the transaction costs paid by users in L2 Rollups are due to data storage. After EIP-4844 is fully implemented, L2 transaction fees will be reduced by an order of magnitude, and the cost of each L2 transaction will be dozens of times cheaper. Therefore, the significance of the Cancun upgrade is no less than that of the Shanghai upgrade. The cost of L2 Rollups is reduced, even to <$0.001, and this is only the impact brought by the first step of ETH expansion upgrade.

Since the launch of the two Op Rollups systems, OP and Arb, their TVL and network activity have ranked in the top 4 and top 6 of the entire public chain. With the order of magnitude reduction in fees brought about by the Cancun upgrade, it is difficult to imagine how big the space and influence of L2 will be.

Lower transaction fees, better transaction experience, and even more application scenarios, the Cancun upgrade will become a turning point for Ethereum L2.

4. Summary of the current technical process and stages of the Cancun upgrade:

There have been 18 discussions in 2023 (as of May 10, 23) to discuss relevant proposals and possible progress. The following is a summary:

1. The Shanghai upgrade has been delayed for a long time, and Cancun is currently under heavy development workload, so it is estimated that it will also be delayed for some time compared to the roadmap;

2. The scope of development should be clear in the next few weeks. Various minor upgrades may have to give way to 4844. It is estimated that some EIPs will be squeezed out of the current discussion scope;

The blob brought by 3.4844 is likely to be usable, which is beneficial to various large, medium and small l2 and modular blockchains.

5. Cancun upgrade and BTC halving resonate, the pattern in the second half of the year will be stirred

There is currently no specific time given for the Cancun upgrade, but it will probably be in the second half of 2023, and the next BTC halving will be on May 9, 2024. The halving expectation is often hyped in advance, which coincides with the Cancun upgrade time in the second half of the year. A new round of reshuffle may be coming. Impact on the L1 chain: Op and Arb alone have been killing it in the public chain market. Arb TVL is second only to Tron and BSC, and Op is weaker than Arb, but it has also squeezed into the top 6, ahead of the last round of star public faces Avax, FTM, Sol, etc.

After the Cancun upgrade in the second half of the year, the competitive advantage of ETH L2 will increase by another order of magnitude. It will become increasingly difficult for non-ETH public chains, and most of them will be eliminated by the market.

Competition within L2 itself:

Arb and Op have dominated the L2 market with their first-mover advantage, but with the Cancun upgrade approaching in the second half of the year, the entire Rollup track will usher in a general rise in benefits. The competition among L2 solutions and the competition among L2 solutions within the same solution will become increasingly fierce, and the emergence of new dark horses cannot be ruled out.

6. In addition to ETH itself, there are 5 investment opportunities worth investing in Cancun upgrades

No.1: L2 leader - Arb and Op. These two are the L2s with the largest TVL and users. They have sufficient first-mover advantage and legitimacy, and have a certain ecological moat. They are the core indicators of the Cancun upgrade.

No.2: Leading applications - GMX, RDNT, Magic, Velo, Snx... GMX, RDNT, Magic are Arb series, Velo, Snx are op series, and they have obtained the corresponding L2 support respectively. The explosion of L2 will also drive the explosion of its ecology.

No.3: L2 alternative - Polygon Polygon is a side chain with its own independent consensus and is not considered L2, but Polygon has several ZK Layer2 solutions, including Polygon ZKEVM. Polygon is equivalent to shifting from the public chain market to embracing ETH L2, and has strong technical strength and market driving force.

No.4: zkRollup application projects - LRC, IMX

Currently, general zkRollup has not issued any coins. LRC and IMX are the sectors of ZK L2 that are more prone to speculation.

No.5: Optimism Fork—Boba, Metis

It lacks legitimacy, but the performance is similar, the ecology is weak, the odds are high, and it is the last segment of the Cancun upgrade.