Ethereum Dencun Upgrade Sparks Surge in Layer-2 Txn Failures Galaxy Research States

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Ethereum Dencun upgrade, which took place in March, has led to an unexpected surge in transaction failures across layer-2 networks, according to recent findings. In an August 21 analysis, titled “150 Days After Dencun,” Galaxy noted the implications of the upgrade.

The upgrade, which introduced data blobs via Ethereum Improvement Proposal (EIP) 4844, aimed to reduce fees by enabling temporary data storage space for rollup data. This change was expected to ease the burden on Ethereum’s execution layer, making transactions more efficient. However, the unintended consequence has been a significant rise in transaction failures on layer-2 networks.

Galaxy researcher Christine Kim reported that the average daily transaction activity on Ethereum layer-2 networks more than doubled, reaching 6.65 million in the 150 days following the upgrade. While this surge in activity was a positive sign of increased network usage, it also led to a higher rate of transaction failures.

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Increased Bot Activity

Kim’s research suggests that the low fees on layer-2 networks have attracted a surge in bot activity, contributing to the increased failure rates. “The majority of the failed transactions stem from high-activity addresses, likely bots,” she noted, indicating that these automated transactions might be overwhelming the system.

The study revealed that Base, a popular layer-2 network, experienced failure rates as high as 21%, while Arbitrum and OP mainnet saw failure rates of up to 15.4% and 10.4%, respectively.

These failure rates were particularly pronounced among high-activity addresses, with Base recording a staggering 41.6% failure rate for addresses attempting 100 or more transactions per day.

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In contrast, lower activity addresses, making five or fewer transactions daily, faced much lower failure rates, with a maximum of 4% across the observed networks.

While this might seem concerning, on August 22, Ethereum founder Vitalik Buterin assured the industry that the ecosystem’s fundamentals are “crazy strong” this year. 

Solana Also Faces Similar Issues

Interestingly, Ethereum’s layer-2 networks are not alone in facing these challenges. Research released by Coinbase on August 13 pointed out similar issues on Solana, another major blockchain network. The report indicated that between 25% and 45% of non-vote transaction fees on Solana were spent on failed transactions, with bot-generated activity likely contributing to these figures.

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