ETF adoption, Dencun update, and lower fees: what's new with Ethereum (ETH)?

Ethereum development plans

One of the latest significant updates, The Merge, released in 2022, is one of Ethereum's development milestones. The following significant updates to the network will be:

• The Surge, aimed at improving the performance of the Ethereum network and increasing its throughput to 100,000 transactions per second;
• The Scourge, designed to reduce centralization risks associated with MEV bots and liquid staking (Lido, Rocketpool, and other protocols);
• The Verge, aimed at simplifying blockchain verification to increase performance;
• The Purge, which will be designed to streamline protocol operation and reduce costs for network participants;
• The exact details of the Splurge are not yet known.

Exact release dates for these updates are not yet available, but it is known that the next update will be released as early as 2025.

Dencun launch and lowering the cost of gas

As of August 2024, Dencun is the latest major update that aims to lower the cost of gas on Ethereum and increase the network's scalability. The name Dencun comes from the merger of the words Cancun and Deneb, which are combined as separate updates.

One of the critical elements of the Dencun update was the Ethereum EIP-4844 enhancement proposal, which includes proto-danksharding, which significantly reduces storage costs through so-called BLOB objects for Layer 2 (L2) solutions such as Arbitrum, Optimism, and the like.

In addition, Ethereum developers introduced changes for EIP-4337 (v0.7), which implemented so-called account abstraction (AA) in March 2023. These changes are aimed at reducing the cost of transactions using smart accounts. Unlike familiar crypto wallets (EOA), smart accounts are accounts with smart contract functionality that allow the creation of wallets without a cid-phrase. These types of wallets will enable you to program different, including complex usage scenarios, automate payments, and change the owner of the account, which you cannot do with standard wallets.

Measures taken to reduce the cost of gas in Ethereum have borne fruit against the backdrop of declining user activity after the failed notorious drops (free token giveaways) of Starknet, zkSync, and LayerZero: as of August 2024, the average price of gas has dropped to 1 gwei or about $0.06, which is the lowest in the last 5 years. In comparison, back in the spring, the price of gas for regular ETH transfers to Ethereum ranged from 40 to 100 gwei and reached several dollars, and the cost of swaps (exchanges via smart contracts) reached up to $100 or more while it dropped to $1.10 in August.

Ethereum-ETF approval and launch

Another high-profile event in 2024 for Ethereum was the launch of ETFs — exchange-traded funds that represent the value of the underlying ETH asset. Large investment funds such as BlackRock, VanEck, Fidelity, Grayscale, and a number of others applied to launch a spot Ethereum-ETF back in 2023, but the US Securities and Exchange Commission (SEC) repeatedly postponed its decision, causing analysts to doubt its approval.

However, at the end of May, the SEC did approve applications for spot Ethereum-ETFs, and trading started only at the end of July. The trading volume on the first day of the Ethereum-ETF launch reached $1 billion, about four times less than the figure with which Bitcoin-ETF debuted.

In addition, the New York Stock Exchange (NYSE) announced plans to launch options-based spot Ethereum-ETFs from investment firms Bitwise and Grayscale.

Approaching ATH and the collapse of the crypto market

After Ethereum approached its ATH for the second time in a year in July, the crypto market began a correction due to the start of payments to affected creditors of the infamous Mt. Gox exchange that went bankrupt in 2014. The company has to pay creditors more than $5 billion in Bitcoin (BTC) and Bitcoin Cash (BCH) cryptocurrencies.

After information about the upcoming start of compensation payments by the Mt. Gox exchange, quotes of the altcoin Ethereum fell from $3900 to $2900 and then to $2330, the lowest value since February 2024. Other factors, such as harmful economic data on the US market and the start of payments to the bankrupt 2023 cryptocurrency lending company Genesis Global, also influenced the cryptocurrency's fall.

Increased interest in ETH staking

Over the past year, the amount of ETH in staking has almost doubled from 28 million to 49 million, about 40% of all coins in circulation. Moreover, liquid steaking (LSD) continues to gain popularity.

For example, according to DeFi Llama, more than a quarter of the total blocked value (TVL) in the Ethereum ecosystem's DeFi protocols is accounted for by only one liquid steaking protocol, Lido.