The Dencun upgrade could be a significant step for mainstream crypto adoption, says Metis CEO Tom Ngo.
Ethereums Dencun upgrade is a big step for mass blockchain adoption that could also bring benefits for traditional financial (TradFi) companies in the crypto space, the CEO of layer-2 (L2) network Metis said.
Tom Ngo told Cointelegraph in an interview:
“Its a big step for mass adoption for companies to have more predictable transactions on their balance sheets. Even for TradFi, all this slippage matters in their trades, how they manage assets, and if they have to bridge or transfer to different parties. So in general, this is one of the biggest upgrades also for L2s as it reduces the gas fees.”
Ethereums Dencun upgrade went live on the mainnet on March 13 as the biggest upgrade since the Merge transitioned the mainnet to a proof-of-stake consensus model on Sept. 15, 2022.
The anticipation around the upgrade was due to Dencun‘s aim of reducing transaction fees on L2 blockchain networks and increasing Ethereum’s scalability.
High transaction costs associated with Ethereum are some of the biggest challenges for mainstream user adoption, for whom even a few cents matter, Ngo said.
“The mainstream users are used to free messaging and free internet. I think blockchain is the same and will keep lowering the barrier of entry for the user as a whole and [enable] organizations and companies where they have to take an account for the fluctuation and gas transaction.”
Some L2 protocols saw a significant drop in transaction fees following the upgrade. Median fees declined as much as 99% on Starknet, from $6 to just $0.04 after the upgrade.
Despite transaction fees on L2s falling, the Dencun upgrade hasnt addressed the issue of high gas fees on the Ethereum mainnet, which could be part of the reason L2s will attract increasingly more users and capital. According to Ngo:
“There's a lot of capital flowing into L2s as more users and more projects become familiar, have more secured ways to transact, and more trusted names are building on L2s. L2s are meant to build up and scale Ethereum. So L2s will continue to grow year over year.”
The total value locked in L2 solutions is at $39.48 billion, up % from $10.3 billion a year ago, according to L2beat data.
Combined TVL of L2s. Source: L2beat
When asked about the challenges of mainstream decentralized finance (DeFi) adoption, Ngo said that user experience and interoperability are two of the most pressing concerns.
Tom Ngo, CEO of Metis, talks about the importance of interoperability.