Ethereum's Cancun-Deneb Upgrade Nears: Layer 2 Ecosystem Poised for Explosive Growth and DeFi Transformation

Ethereum's Cancun-Deneb upgrade is drawing near, with market anticipation building rapidly. As Ethereum's next major network iteration following the Shanghai upgrade, Cancun-Deneb targets scalability head-on—specifically by introducing Ethereum Improvement Proposal EIP-4844 (Proto-Danksharding) to drastically reduce Layer 2 network fees and enhance overall data availability. Industry consensus holds that this upgrade will be a key catalyst for the Layer 2 ecosystem's explosion, potentially reshaping the competitive landscape of decentralized finance (DeFi).

1. Cancun-Deneb: From "Data Blobs" to "Permanent Data Space"

One of Ethereum's primary bottlenecks is that Layer 2 networks consume significant block space when submitting transaction proofs to the mainnet. While Layer 2 itself offers low processing fees, the final settlement cost remains constrained by mainnet congestion. The "Blob" data space introduced by Cancun-Deneb will provide Layer 2 with dedicated, temporary data storage areas. These data are not permanently stored on-chain but are sufficient for validators to complete validity checks. This means the cost for Layer 2 to submit proofs will drop dramatically—by an estimated 90% or more, according to industry analysis reports. This is not an exact figure but a widely discussed direction within the community. In fact, core developers like Vitalik Buterin have repeatedly emphasized that Proto-Danksharding is just the first step; with the eventual implementation of full sharding, Ethereum's scalability will achieve an order-of-magnitude leap.

2. Layer 2 Ecosystem: Cost Reduction and Experience Upgrade

Current mainstream Layer 2 solutions include Optimistic Rollups like Arbitrum and Optimism, as well as ZK-Rollups based on zero-knowledge proofs (e.g., ZKSync, StarkNet, Scroll). The Cancun-Deneb upgrade positively impacts both types, though the degree of benefit may vary slightly.

Optimistic Rollups: First to Benefit in a Mature Track

Arbitrum and Optimism are the two highest TVL (Total Value Locked) Layer 2 networks, together accounting for over 85% of the market. They rely on Ethereum's mainnet to post state roots and fraud proofs, incurring high gas fees each time. After Cancun-Deneb, these data can be stored in Blobs, significantly reducing costs. According to data platforms like Dune Analytics, Arbitrum and Optimism submit thousands to tens of thousands of transactions to the mainnet daily. Post-upgrade, their operational costs could shrink by 70% to 90%, directly benefiting users through lower fees. Reduced costs will attract more long-tail assets and small to medium-sized transactions to Layer 2 networks, driving on-chain activity.

ZK-Rollups: Technical Advantages and Data Challenges

While ZK-Rollups have higher computational costs for generating proofs, the data volume submitted is much smaller than for Optimistic solutions. However, they still need to publish a large amount of transaction data to the mainnet to ensure decentralized security. Cancun-Deneb will simultaneously lower data publishing costs, pushing ZK-Rollup total costs closer to their theoretical limit. For example, ZKSync Era, since its launch in 2023, has seen TVL exceed hundreds of millions of dollars, but its gas fees remain higher than Arbitrum's. Post-upgrade, ZK-Rollups could achieve fee rates comparable to centralized exchanges, greatly boosting their use in DeFi and payments.

3. DeFi Ecosystem: Asset Liquidity and Application Innovation

The reduction in Layer 2 costs will directly stimulate DeFi ecosystem activity. Currently, Ethereum mainnet DeFi total value locked stands at around $50 billion (per DeFi Llama data), while Layer 2 TVL has approached $20 billion, growing much faster than the mainnet. After Cancun-Deneb, this trend will become even more pronounced.

From "Cross-Chain Bridges" to "Native Interoperability"

In the past, moving assets between different Layer 2 networks required third-party cross-chain bridges, which were not only costly but also posed security risks. Post-upgrade, as more interoperability protocols based on shared Blob data (such as Across and Connext) mature, asset transfers between Layer 2s will become as seamless as transfers within the mainnet. This could break the current "island effect," allowing liquidity to flow freely between different Rollups and giving rise to a unified Layer 2 DeFi market.

Attracting Institutional Capital

After Bitcoin surpassed $100,000 in 2024 (one of its historical peaks, mentioned here as a widely recognized price trend), many traditional institutions began re-evaluating crypto assets. However, institutional capital is highly sensitive to transaction costs and execution efficiency. Ethereum mainnet gas fees exceeding 100 Gwei during peak times have deterred many institutions. Layer 2 post-upgrade could reduce gas to below $0.01 while maintaining mainnet-level security, paving the way for DeFi's "institutionalization"—whether in money markets, derivatives trading, or tokenization of real-world assets (RWA), all could see broader adoption on Layer 2.

4. Project Updates and On-Chain Data Outlook

Recently, multiple Layer 2 projects have announced adaptation plans for Cancun-Deneb. The Arbitrum Foundation has revealed it is testing EIP-4844-compatible versions, while Optimism will upgrade its Bedrock architecture to fully utilize Blob space. In the ZK camp, teams from Scroll and StarkNet have shared preliminary test results on their blogs, showing gas reductions in line with expectations. According to L2Beat data, as of the latest statistics, the average daily TPS across all Layer 2 networks exceeds 50, compared to mainnet's TPS of around 15. Post-upgrade, total Layer 2 TPS could surpass 200, covering the vast majority of daily transaction needs.

It is important to note that current on-chain data shows a clear "Cancun-Deneb anticipation" pattern: Ethereum mainnet gas prices have remained low recently, partly due to users and developers migrating activity to Layer 2; meanwhile, the share of DEX trading volume on Layer 2 has risen from 28% at the start of the year to approximately 40% (source: The Block). If the upgrade is successfully implemented, this proportion could quickly approach 70% in the second half of the year.

5. Potential Risks and Challenges

Despite the bright outlook, the Cancun-Deneb upgrade is not without risks. First, the introduction of Blob data space increases the complexity of Ethereum's consensus layer; any code-level vulnerability could lead to network forks or security incidents. Historically, every major Ethereum upgrade has required months to verify stability. Second, Layer 2 solutions themselves still face issues of insufficient decentralization—most Rollups' sequencers are operated by teams, posing a single point of failure risk. A surge in transaction volume post-upgrade could affect the entire ecosystem if a sequencer fails.

Additionally, regulatory uncertainty cannot be ignored. The U.S. SEC and other regulators are still evolving their definitions of "proof-of-stake" and "Rollup"; classifying certain Layer 2 tokens as securities could dampen market sentiment. Finally, competitors like Solana and Avalanche are also accelerating, using different scaling paths (e.g., proof-of-history, subnet protocols) to vie for users and liquidity.

6. Conclusion

Ethereum's Cancun-Deneb upgrade is a critical milestone for pushing the Layer 2 ecosystem into "economies of scale." From cost structure optimization and user experience improvement to DeFi application innovation, the upgrade will significantly enhance Ethereum's competitiveness as a settlement layer. In the short term, the market has already formed a consensus, and related tokens (such as ARB, OP, ZK) may see excess returns driven by positive news. In the long term, the migration of on-chain activity will solidify Ethereum's value foundation. However, investors should be wary of technical risks and regulatory fluctuations, and rationally assess the gap between expectations and actual implementation.

Risk Warning: The above content is for reference only and does not constitute investment advice. The cryptocurrency market is highly volatile, technical upgrades carry uncertainties, and policy risks are ever-present. Readers should make prudent decisions based on their own risk tolerance and assume responsibility independently.