Ethereum’s (ETH) Dencun upgrade, launched in March, aimed to revolutionize the network’s efficiency by introducing proto-danksharding through EIP-4844. While the upgrade significantly reduced transaction fees and boosted overall activity, it appears to have inadvertently led to a spike in transaction failures across Ethereum’s layer-2 (L2) networks.
On August 22, Galaxy researcher Christine Kim shed light on these unintended consequences in a post on X. Her analysis, detailed in Galaxy’s recent report “150 Days After Dencun,” reveals that the much-anticipated upgrade has had a noticeable impact on transaction success rates on L2 platforms.
The Dencun upgrade, which introduced data blobs for temporary storage of rollup data, was intended to offload pressure from Ethereum’s execution layer, thereby lowering fees and increasing throughput. According to Galaxy’s report, transaction activity on Ethereum’s L2 networks surged by 6.65 million transactions daily over the 150 days following the upgrade. However, this increase has been accompanied by a troubling rise in transaction failures.
Kim’s analysis highlights that these failures are predominantly linked to bot activity. “The majority of failed transactions are coming from high-activity addresses, which are likely bots exploiting the reduced fees on L2s,” Kim noted. The report underscores that with the low fees introduced by the upgrade, bots have become more active, leading to higher failure rates.
Data from Galaxy’s report shows alarming failure rates on various L2 networks: Base experienced a failure rate of up to 21%, Arbitrum saw rates as high as 15.4%, and OP mainnet faced a rate of up to 10.4%. Particularly concerning are the statistics for high-activity addresses—those engaging in 100 or more transactions daily—where failure rates soared to 41.6% on Base, 20.87% on Arbitrum, and 12.85% on OP mainnet.
In contrast, addresses with lower activity—those making five or fewer transactions per day—reported failure rates of only up to 4% across all observed networks. This discrepancy suggests that while low fees benefit casual users, they also attract high-volume bots that can overwhelm the system.
This issue is not confined to Ethereum alone. Coinbase’s recent research on August 13 also pointed out that Solana faces a high rate of transaction failures, with 25% to 45% of non-vote transaction fees being wasted on failed attempts. Similarly, Cointelegraph has suggested that Solana’s impressive transaction metrics might be artificially inflated by bot activity.
Also Read: Ethereum ETF Showdown – BlackRock’s ETHA Dominates With $1 Billion Inflows Amid Market Caution
Yet, not everyone sees bot activity as detrimental. Michael Nadeau, founder of DeFi Report, challenged the notion that bots are merely spam generators. In an August 9 post on X, Nadeau argued that bots contribute to market liquidity and efficiency, adding that they do, indeed, pay transaction fees on public blockchains.
As Ethereum’s layer-2 networks grapple with these evolving dynamics, the community will need to balance the benefits of lower fees and increased activity with the challenges posed by heightened transaction failures. The Dencun upgrade has undeniably advanced Ethereum’s scalability, but its ripple effects on transaction reliability underscore the complexities of blockchain innovation.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
About The Author
