Ethereum, L2, AA wallet, cross-chain bridge, and decentralized storage networks will all benefit from the Cancun upgrade.

Author: NingNing

The biggest beneficiary of the Cancun upgrade is $ETH, with a heavy position. L2 projects include $ARB$OP. Leading cross-chain bridges include $RUNE$AXL$STG$CELER$SYN. AA wallets include $TWT$SFP$C98. Decentralized storage networks include $FIL$AR.

What investment opportunities does the Ethereum Cancun upgrade hold for Aphla?

The Cancun upgrade (Dencun) is another major mainnet upgrade after the successful deployment of the Shanghai upgrade in March this year.

As we know, the successful deployment of the Shanghai upgrade in March gave birth to a wave of LSD and LSDfi super trends. Investment targets such as $LDO$RPL$SSV$LBR$PENDLE became Aphla opportunities that outperformed the market.

So naturally, the market will have expectations that the Cancun upgrade will also bring some Aphla investment opportunities.

However, before discussing what Aphla investment opportunities there are, let's first briefly understand the Cancun upgrade.

What is the Cancun upgrade?

The upcoming Cancun upgrade is divided into two parts: Deneb focuses on the consensus layer (CL), while Cancun focuses on the execution layer (EL).

According to a statement provided by Ethereum core developer Tim Beiko, the Cancun upgrade includes five key Ethereum Improvement Proposals (EIPs) aimed at expanding data storage and reducing costs. They are:

• EIP-4844: Sets the stage for the full implementation of Danksharding to enhance scalability.
• EIP-1153: Reduces on-chain data storage costs and optimizes block space.
• EIP-4788: Improves the structure of cross-chain bridges and staking pools.
• EIP-5656: Makes minor code modifications to the Ethereum Virtual Machine (EVM).
• EIP-6780: Removes SELFDESTRUCT, which could terminate smart contracts.

The most important feature of this upgrade is EIP-4844, which introduces Proto-Danksharding, a transitional phase to achieve full Danksharding, which is expected to significantly reduce gas fees and increase transaction throughput by utilizing data "blobs."

The implementation of EIP-4844 involves adding a new TX type, blob TX, dedicated to storing L2 Rollup to the Ethereum mainnet Beacon chain consensus layer. After 3 weeks, the blob is discarded to decentralized storage networks such as IPFS or Web3 data service providers like Alchemy.

The storage space for a single blob is 128KB, and initially, EIP-4844 sets 4 blobs per block, which will be expanded to 64 in the future.

What are the functions of the Cancun upgrade?

The Cancun upgrade brings substantial benefits to the Ethereum mainnet, including:

• Enhanced scalability: The introduction of Proto-Danksharding will help process a larger volume of transactions at a faster speed, enhancing Ethereum's role as a DA layer and security guarantee for L2 projects.
• Reduced Gas fees: By utilizing data "blobs" and implementing EIP-4844, the Cancun upgrade can significantly reduce Gas fees for L2 interactions.
• Strengthened security: With EIP-6780, the network's security infrastructure will be strengthened to protect user data and assets.
• Efficient data storage: EIP-1153 will optimize Ethereum's chain data storage, improving operational efficiency and cost-effectiveness, a boon for L2 projects that rely on optimized data management.
• Enhanced cross-chain bridge connectivity: Through the EIP-4788 upgrade, interoperability between different chains will be smoother and more secure.
• Technological innovation: The minor code modifications introduced by EIP-5656 lay the foundation for future technological advancements, potentially driving innovation in L2.

Which sectors will benefit from the Cancun upgrade?

• Ethereum: The Cancun upgrade will make the Ethereum network more adaptable, secure, and user-friendly, consolidating its position in the Web3 space.
• L2 projects: The Cancun upgrade will significantly reduce Gas fees for L2 interactions and accelerate transaction confirmation speed, greatly enhancing user experience.
• AA (Account Abstraction) wallets: Infrastructure optimization will also benefit the application layer, and AA wallets are direct beneficiaries of the Cancun upgrade. The upgrade will greatly reduce Gas fees for creating and interacting with AA wallets, improving user experience, which has been a major pain point.
• Cross-chain bridges: Cross-chain bridges will mainly benefit from the EIP-4788 upgrade, and EIP-4844 will also reduce the cost of using cross-chain bridges.
• Decentralized storage networks: After the deployment of EIP-4844, blob data will be permanently stored in decentralized storage networks such as IPFS, which will be a gold mine for MEV bots, market makers, data companies, and other institutions, bringing new value to decentralized storage networks.

How to build a Cancun upgrade investment portfolio?

First of all, I do not believe that just because the Shanghai upgrade brought a wave of trends, the Cancun upgrade will definitely bring a new trend.

The establishment of a Cancun upgrade trend is constrained by factors such as the Federal Reserve's monetary policy cycle, Bitcoin halving cycle, seasonal cycles, and risk events.

The core skill in building an investment portfolio is to find a balance between odds and risk-reward ratios that suits oneself.

When building a Cancun upgrade investment portfolio in September, the decision should be based on a win rate of ≈50% and a risk-reward ratio of >3.

When building a Cancun upgrade investment portfolio, the available investment targets include:

• The biggest beneficiary of the Cancun upgrade, $ETH, with a heavy position.
• L2 projects such as $ARB$OP, which are perceived by the market as beneficiaries of the Cancun upgrade. They have a higher degree of Price In compared to other targets.
• Leading cross-chain bridges such as $RUNE$AXL$STG$CELER$SYN, which are currently overlooked by the market. If the gas fees and confirmation times for cross-chain bridges exceed expectations after the Cancun upgrade, this sector may potentially yield Alpha returns.
• AA wallets such as $TWT$SFP$C98. It is expected that the interaction experience of AA wallets will also benefit from the Cancun upgrade, and there may be improvements beyond market expectations. Unfortunately, wallets have not received much attention from mainstream funds, so a light position is recommended.
• Decentralized storage networks such as $FIL$AR. The market has almost completely overlooked the fact that decentralized storage networks will also benefit from the Cancun upgrade, and it is uncertain whether the market will ultimately recognize and accept this fact.

Everyone can choose suitable targets according to their own situation and create an investment portfolio. If you understand coding, you can further optimize the position ratio of the investment portfolio using effective combination methods.

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