KEY TAKEAWAYS
- Ethereum’s Fusaka upgrade, set for December 3, aims to enhance scalability by introducing new pathways for rollups.
- The upgrade involves two hard forks, Fulu and Osaka, updating both the consensus and execution layers.
- Fusaka is expected to lower transaction costs on layer 2 networks, benefiting DeFi platforms like 1inch.
- Long-term goals include transitioning to Lean Consensus, allowing Layer 1 to verify zero-knowledge proofs.
Ethereum’s next major upgrade, Fusaka, is scheduled to go live on December 3. This marks the first significant update since the Pectra upgrade in early May. Fusaka’s impact is expected to be extensive, affecting every rollup, wallet, and decentralized application (dApp) that relies on Ethereum for data and settlement.
In practical terms, Fusaka aims to significantly scale Ethereum’s throughput by opening new pathways for rollups. The upgrade consists of two coordinated hard forks: Fulu and Osaka. Fulu updates the consensus layer, where validators agree on the chain’s history, while Osaka upgrades the execution layer, where transactions are processed. Together, these updates continue Ethereum’s transition toward a more modular network.
The long-term goal is to rebuild consensus as Lean Consensus, allowing the Layer 1 (L1) to verify tiny zero-knowledge proofs instead of re-executing transactions. Although this shift will take several years, Fusaka is expected to deliver immediate benefits.
Impact on Decentralized Finance and Transaction Costs
According to Tanner Moore, Developer Relations Engineer at 1inch, the Fusaka upgrade will directly benefit users by reducing transaction costs on layer 2 networks. Moore explains that lower transaction costs will result in better rates across 1inch’s swapping platforms. He suggests that in a future where Ethereum gas costs are effectively zero, on-chain trading could compete directly with centralized exchanges on profit margins, potentially giving decentralized protocols an advantage.
Moore further elaborates that Fusaka’s focus on scalability is a step towards decentralized finance (DeFi) gaining ground on centralized exchange (CEX) trading volumes. He envisions a future where companies operate like Coinbase but with DeFi powering their operations without users being aware.
The main Ethereum scalability-focused improvement proposals (EIPs) to be implemented under the Fusaka upgrade are expected to have a significant impact across the DeFi landscape. More insights on the Fusaka upgrade can be found here.
Why This Matters: Impact, Industry Trends & Expert Insights
Ethereum’s Fusaka upgrade is set to enhance the network’s scalability and efficiency, impacting all rollups, wallets, and dApps relying on Ethereum for data and settlement. The upgrade consists of two coordinated hard forks, Fulu and Osaka, which aim to improve both the consensus and execution layers.
A recent industry report highlights that Ethereum Layer 2 scalability solutions are experiencing explosive growth, with platforms like Arbitrum and Optimism processing thousands of transactions per second. This aligns with the Fusaka upgrade’s goals of enhancing network efficiency and lowering operational barriers for L2s.
Insights from Metrika emphasize the significance of Fusaka in improving network efficiency and scalability through innovations like PeerDAS, which reduces bandwidth and boosts throughput. This supports the expected positive impact of the upgrade on Ethereum’s scalability and transaction costs.
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