Speculation surrounding meme tokens is intensifying in the cryptocurrency market, impacting on-chain activity and transaction fees. This week, we explore the performance of meme tokens and their implications for the blockchain ecosystem. Additionally, we discuss how the upcoming Dencun upgrade will aid Layer 2 solutions in addressing the steeply rising fees caused by the recent meme coin frenzy.

During a robust crypto bull market, retail traders are increasingly investing in riskier assets, resulting in meme tokens experiencing significant gains averaging well over the past month. Leading the surge is the PEPE token, which has seen an astounding 600% monthly return, surpassing Ethereum-based tokens.

While PEPE has seen a slight pullback, 91% of holders remain profitable, despite having only 170,000 holders compared to SHIB’s 1.3 million and DOGE’s 6.3 million. Solana-based tokens have recorded a weekly DEX trading volume of approximately $15 billion, nearly matching Ethereum’s staggering $20 billion.

Ethereum transaction fees have skyrocketed to levels not seen in nearly two years due to the meme coin mania, surpassing $190 million per week, equating to an annual run rate exceeding $10 billion. Ethereum's fee-burn mechanism has depleted its supply by 33,000 ETH ($125 million) this week. However, exorbitant transaction fees on the mainnet, averaging $28, have deterred many users. Meanwhile, since the Nitro upgrade, Arbitrum's fees, a popular Layer 2 solution, have surpassed $1.

The Dencun upgrade for Ethereum is scheduled for March 13, incorporating Proto-danksharding, or EIP-4844. Proto-danksharding introduces blobs, a new transaction type that significantly reduces the cost of data availability for Layer 2 solutions.

As Optimistic stack chains become more efficient, market forecasts indicate that primary Layer 2 solution fees will decrease by at least 80%. This upgrade will streamline operations, potentially reducing fees for activities such as USDC deposits on Aave to $0.0091—a 27-fold reduction. Polymarket projections even anticipate a 60-fold reduction in Layer 2 costs.

While the exact extent of fee reductions post the Dencun upgrade remains uncertain, one thing is clear: a paradigm shift is imminent for the blockchain system. These upgrades are expected to alleviate gas prices, which have surged due to the proliferation of social media tokens, leading to a more cost-effective platform aligned with Layer 2 network requirements.