Dencun Update Set to Boost Ethereum’s Ecosystem Amidst Rising Competition, Asserts Grayscale

Ethereum’s Big Moment: After BlackRock, Fidelity Seeks SEC Greenlight For Spot Ether ETF

Grayscale Research has highlighted the potential of Ethereum’s upcoming Dencun upgrade to boost the network’s competitiveness in the Smart Contract Platforms crypto sector.

In a recent blog, the crypto asset manager stated that Ethereum’s performance in 2023, which lagged behind the broader smart contract platforms crypto sector, is indicative of the network going through its “adolescent phase.” However, with the Dencun upgrade, the firm Ethereum is on the cusp of “growing up” through a pivotal transformation aimed at addressing its scalability challenges.

The Dencun upgrade, scheduled for March 13th, 2024, is expected to help Ethereum compete in terms of scalability with faster chains such as Solana.

“The upgrade, alongside the broader Ethereum 2.0 initiative, marks a significant milestone in Ethereum’s journey towards becoming a more scalable, efficient, and user-friendly platform.” The firm wrote.

Notably, the upgrade is also set to be the largest upgrade since the Merge in 2022, which saw Ethereum transition from a Proof of Work (POW) to a Proof of Stake (POS) blockchain.

It is important to note that Ethereum presently leads all other networks in the crypto sector in terms of the number of developers and the total number of applications, providing a robust environment for application interoperability and innovation. Additionally, Ethereum dominates with $51.10 Billion in Total Value Locked (TVL) at press time, a key indicator of ecosystem liquidity, at over roughly five times that of Tron, its next largest competitor.

Grayscale also highlighted the potential of Ethereum’s Layer 2s, such as Optimism (OP) and Arbitrum (ARB), which have already attracted liquidity that rivals some of Ethereum’s largest Layer 1 competitors. Notably, these independent products have spurred greater competition and innovation, solved scalability pain points and enhanced the larger Ethereum ecosystem.

Additionally, Grayscale highlighted the potential of a spot Ethereum ETF approval in driving mainstream adoption of the cryptocurrency. It is important to note that Grayscale is one of the applicants for the product, having filed papers with the SEC in October 2023 to convert its Grayscale Ethereum Trust into a spot ETF. 

Last week, the investment firm received backing from Coinbase, the appointed custodian of the Grayscale Ethereum Trust, which sent a letter to the SEC highlighting Ethereum’s market maturity and regulatory compliance, arguing that it is a commodity similar to Bitcoin.

That said, Grayscale’s report comes even as Ethereum continues to soar, following a strong rebound from the $2,150 multi-year support level last month. Last week, Ethereum surpassed the $3,000 level for the first time since April 2022. At the time of writing, Ethereum was trading at $3,306, reflecting a 2.90% growth in the past 24 hours.

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