Ethereum’s Upcoming EIP-4844 Upgrade Has Game-Changing Potential, Says Bitwise CIO

Matt Hougan, the Chief Investment Officer of Bitwise Investments, recently shared his optimism for the future of Ethereum (ETH) and its upcoming upgrades.

According to an article by The Daily Hodl published on Tuesday (April 4), during an interview with Anthony Pompliano, Hougan expressed his excitement about the development activity in the Ethereum ecosystem, particularly regarding Ethereum Improvement Proposal 4844 (EIP-4844). This upgrade aims to significantly reduce transaction costs, which could unlock many new applications.

Hougan said,

I’m really excited about what’s going on in the Ethereum ecosystem and particularly EIP-4844 and how it will quash costs on layer-2 solutions. I think people don’t understand how important that is. They don’t understand the value of a price that’s effectively zero. If you think about the cost of crypto transactions, it has gone from a few dollars on average with spikes into the hundreds to a handful of 20 cents,10 cents.

It’s going to be sub-penny by the end of this year if Ethereum executes on its roadmap. And the applications that open up at sub-penny that aren’t open at 10 or 20 cents per transaction are really enormous. And I know that sounds very theoretical, but I think it’s a game changer. So I’m really excited about that.

Hougan also touched upon the current state of the crypto market and noted that investor confidence is beginning to return. He emphasized that we are in a bull market and expects more people to realize this fact as the year progresses.

According to Binance Academy, EIP-4844, also known as Proto-Danksharding, is a proposed Ethereum Improvement Proposal to enhance the Ethereum network’s scalability. Sharding, a method of partitioning databases into smaller segments, improves efficiency and performance. When applied to the blockchain, specifically Ethereum, it can help lower transaction costs and increase throughput.

Danksharding, a type of sharding proposed for Ethereum, is anticipated to increase Ethereum’s transactions per second (TPS) to around 100,000. To put this into perspective, Ethereum’s base layer processes about 15 TPS, and its layer 2 rollups handle roughly 100 TPS as of Q1 2023.

EIP-4844 serves as the initial step before full danksharding implementation, aiming to increase TPS to approximately 1,000. One of its key features is the introduction of a new transaction type that accepts “blobs” of data, crucial for enabling full danksharding. The implementation of EIP-4844 is expected in the second half of 2023, though it could face delays.

Binance Academy also highlights innovations in danksharding, such as the merged fee market, where a single proposer selects transactions for all shards, and proposer/builder separation to address the issue of maximal extractable value (MEV). These innovations contribute to Ethereum’s potential growth and increased scalability.

Two months ago, Hougan appeared on the “Making Money with Matt McCall” podcast, offering insights into the cryptocurrency market and assets investors should consider. He underscored the importance of having both Bitcoin (BTC) and Ethereum (ETH) in one’s portfolio, with Bitcoin being the go-to choice for institutions.

Regarding Ethereum, Hougan praised the ecosystem’s technological progress, with an impressive number of developers and rapidly decreasing transaction costs. He also suggested looking into Cosmos (ATOM) as an exciting alternative to the two major cryptocurrencies, pointing out its potential to drive the market forward in the future.
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