EIP-4788 will greatly benefit DApp security and reduce risk across the industry. Dencon strengthens the ecosystem against a major attack vector by eliminating the dependence on external oracles that caused the $1 billion DeFi attack in 2022. This change is in line with the broader trend towards protocol infrastructure for less risk.
Liquid Staking Derivatives Leverage Ethereum’s Dencun Upgrade for Web3 Innovation
Liquid staking protocols are poised to grow exponentially as crypto staking becomes a multibillion-dollar industry. The total value locked in Ethereum liquid staking has increased by over 300% in the past year, reaching $5 billion. Liquid staking protocols such as Lido, Rocketpool, Swell, Stader can directly access critical data such as validator balances and status to increase efficiency and security. As seen in the chart, Ethereum liquid staking has increased since the switch to PoS, but Lido is still dominant. We expect this growth to continue after Dencun and for Lido’s share to be further reduced by new protocol participants such as Ankr.
Restaking protocols such as Eigenlayer, KelpDAO, Swell, ether.fi also benefit from direct data access for advanced transactions. Notably, Renzo, part of Eigenlayer’s ecosystem, was launched on the Ethereum mainnet. The staking niche is still in its early stages, but liquid staking protocols are also entering. Eigenlayer is currently the leader, as seen by the increase in its staked assets in mid-2023, due in part to raised caps. Dencun and the future Eigen token economy should support the growth of the ecosystem.
The Dencun Upgrade will fuel greater creativity for DeFi services leveraging staked assets. For example, Lybra Finance and Prisma Finance currently offer various risk/return portfolios on staked ETH. Adventurous yield aggregators like Abracadabra will likely expand into liquid/re-stake assets. Greater composability unlocks growth.
The Dencun Upgrade also strengthens cross-chain bridges through optimizations of EIP-4788 and fee reductions of EIP-4844. Lower fees reduce Layer 2 siloization, increasing the use of bridges and their importance for an interconnected blockchain network. This increases the prosperity of the cross-chain ecosystem.
For blockchain games, Dencun’s Layer 2 supports enable the gradual decentralization of Web2.5 models, making it easier to participate for early-stage real blockchain games. As performance hurdles decrease, developers can focus more on game and business logic. This brings the vision of a thriving ecosystem closer to reality, paving the way for blockchain games to disrupt the $200 billion gaming market.
About CoinEx
Founded in 2017, CoinEx is a global cryptocurrency exchange committed to making transactions easier. The platform offers a range of services including spot and margin trading, futures, clearing, automated market maker (AMM) and financial management services. The exchange serves more than 5 million users in more than 200 countries and regions. Since its establishment, CoinEx has remained true to the “user first” service principle. With a sincere intention to develop a fair, respectful and secure crypto trading environment, CoinEx makes products and services easy to use, allowing users to easily access the world of cryptocurrency.
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