ETH Dencun Upgrade Draws Increased L2 Bots and Transaction Failures

August 23, 2024 04:39 PM AEST | By Team Kalkine Media

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The Ethereum Dencun upgrade, which was implemented in March 2024, has had a notable impact on the efficiency of Ethereum’s layer-2 (L2) networks. According to a recent analysis by Galaxy Research, this upgrade has significantly improved the economics of rollups, but it has also led to an increase in failed transactions across these networks.

The Ethereum (ETH) Dencun upgrade, which included the activation of EIP-4844, introduced data blobs, also known as proto-danksharding. This feature was designed to provide temporary data storage for rollup data, thereby reducing the strain on the execution layer. As a result, Ethereum layer-2 networks have seen a substantial rise in transaction activity. Specifically, daily transactions on these L2 networks have more than doubled since the upgrade, reaching an average of 6.65 million in the 150 days following the upgrade.

However, this increase in transaction volume has been accompanied by a rise in transaction failure rates. Galaxy Research highlights that the heightened activity on layer-2 networks has led to a significant number of failed transactions, with an increase in bot-driven activity being a contributing factor. For instance, the Base network has experienced failure rates as high as 21%, Arbitrum has seen rates up to 15.4%, and OP Mainnet has encountered failure rates reaching 10.4%. Notably, addresses with high transaction volumes—those executing 100 or more transactions per day—face even higher failure rates, with figures reaching 41.6% on Base, 20.87% on Arbitrum, and 12.85% on OP Mainnet.

In contrast, addresses with lower activity levels—those making five or fewer transactions daily—exhibit much lower failure rates, generally not exceeding 4% across the observed networks.

This trend is not exclusive to Ethereum’s layer-2 networks. Similar issues have been observed on other blockchain platforms, such as Solana, where a significant portion of transaction fees are attributed to failed transactions. Despite these challenges, it is noted that bot activity, while contributing to higher failure rates, also plays a role in providing liquidity and efficiency to blockchain markets.

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