Dencun, a major upgrade to Ethereum that took place in mid-March, promises to enhance the scalability of the network, but has shown some troubling side effects. After Dencun, Ethereum may no longer be “sonic money,” according to CryptoQuant analysts.
“Sonic money” is a term used to describe an asset that has stable purchasing power and also increases in price over time. The total supply of “sound money” such as gold and Bitcoin is constant, but the total supply of “super healthy money” decreases, leading to deflation.
Ethereum is often referred to as “ultrasonic money.” However, analysts suggest that Denkun will lead to further inflation in Ethereum, destroying its “sonic money” characteristics.
As mentioned earlier, Ethereum's fee burn is an event that marks Ethereum's landmark transition from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) consensus mechanism. It has since declined to one of its lowest levels.
People like deflation in the token system because they think it increases value. However, this may not be as important as security.
ETH burn?
According to data from Ultrasound.money, the global ETH supply has increased by nearly 35,000 ETH in the past 30 days, equivalent to nearly $106 million at current prices. The reason could be the superiority of layer 2 solutions that exploit inefficiencies in the Ethereum network.
The Dencun upgrade brought many improvements, the most important of which was EIP-4844. The proposal introduces a new block structure called a “blob” that is specifically designed to significantly reduce layer 2 transaction fees.
After the Dencun upgrade, gas prices for many layer 2 networks have dropped significantly.
Since Ethereum has introduced a fee burning mechanism since 2021, Ethereum gas prices tend to rise as network traffic increases. As gas prices rise, more ETH is burned by the network, effectively taking it out of circulation.
still open market
It is also worth noting that Ethereum gas prices have also fallen significantly in recent years, averaging just under 10 GWEI (equivalent to about $0.50).
Analysts note that prior to the Dencun upgrade, high network activity consumed a large amount of ETH, limiting the growth in token supply. However, they note that Dencun's upgrades, particularly his EIP-4844, will reduce reliance on network activity for toll burn.
Based on this observation, the report suggests that Ethereum's deflationary trends may be unsustainable and the concept of “ultrasonic money” may no longer apply.
Ethereum’s Pectra encounters controversy
Ethereum is headed for its next major upgrade, the Pectra hard fork. However, there is controversy regarding his one of the proposals, his EIP-3074. This proposal aims to enhance the convenience and security of wallet and transaction management. Some community members have expressed concerns about potential security risks.
The main concern is the Invoker stage, which is responsible for processing and packaging transaction approvals. Without rigorous auditing, malicious attackers may be able to exploit vulnerabilities at this stage.
Lack of transparency at the caller stage can lead to users unknowingly giving authorization to malicious actors, resulting in significant asset loss.
Itamar Lesuisse, co-founder of Argent wallet, said that EIP-3074 may have potential vulnerabilities. He said the proposal could allow a fraudster to withdraw all funds from a wallet with just one off-chain verification.
“This should allow fraudsters to exfiltrate entire wallets with a single off-chain signature. We expect this to become a major use case.” In his comments on X, Mr. Rusuis said:
Mudit Gupta, chief information security officer at Polygon Labs, called for a ban on MAGIC signatures for EIP-3074. He expressed concern that cold wallets could be compromised if transaction requests were combined with cold wallets.
Despite these mixed opinions, the Ethereum developer team has decided to implement EIP-3074 in the upcoming Pectra hard fork. Additionally, the Ethereum community has suggested including his EIP-7251 in the same update. This proposal aims to increase ETH staking limits and streamline the validator setup process for operators.
