The Ethereum Dencun upgrade will introduce “Proto-DankSharding”, which is designed to reduce transaction costs and address scalability of the L2 blockchain. The upgrade forms part of Ethereum’s ambitious strategy to enhance scalability and reduce transaction costs for its users. This article will briefly introduce the technical components of the Dencun upgrade, its development process, and its potential impact on the transaction capabilities and cost efficiency of the Ethereum network.
Dencun core function: Proto-DankSharding
Proto-DankSharding is a core upgrade of Dencun that reduces transaction costs and reduces data availability costs on L2 blockchains, thereby solving key scalability challenges. This will lay the foundation for the eventual implementation of “Danksharding” and further extend these benefits.
development process
The Dencun upgrade is short for Cancun-Deneb, where Cancun focuses on the network scalability of the execution layer and Deneb focuses on improving the consensus layer of Ethereum. In this upgrade, EIP-4844 is the core content, and improvement proposals such as EIP-1153, EIP-4788, EIP-6780, and EIP-7514 are also part of the upgrade.
The deployment process of the Dencun upgrade includes activation on various test networks. After the activation of the Goerli and Sepolia test networks at the end of January this year, the final stage of testing on the Holesky test network was successfully completed on February 7.
The final Ethereum client with Dencun functionality is expected to be released by February 22, with validators having about two weeks to install the updated client version on their nodes.
Currently, Ethereum developers have shared information about Geth V1.13.12, also known as Edolus, and plans to launch the Dencun upgrade on the mainnet on March 13 at 13:55 UTC, block height 8626176. The date requires developer approval and confirmation via the open source software platform GitHub.
Dencun upgraded technological innovation
One of the famous technological innovations introduced in the Dencun upgrade is the blob, which is designed to temporarily store and compress large amounts of transaction data off-chain through Ethereum nodes, reducing storage and processing requirements. Blobs are capable of temporarily storing data, which is only necessary for short-term transaction validation, and can eventually be deleted to prevent network storage from being overloaded. The security and validity of data processing are guaranteed by encryption technology that detects data changes.
According to previous reports, Proto-Danksharding reduces the number of blobs per block to 16, and the blob size per block does not exceed 128 KB. As a result, block space is expected to increase by approximately 2 MB. The additional data space will enable optimistic and zero-knowledge rollups to publish proofs of transaction data on-chain, which will provide the actual data via blobs instead of calldata. The blob data is deleted after two weeks, while the “calldata” is stored on the Ethereum blockchain indefinitely.
Impact on trading capabilities and costs
When implemented, the Dencun upgrade is expected to significantly increase Ethereum’s transaction processing capabilities, ultimately enabling the network to process 30,000-100,000 transactions per second. This enhancement is critical to Ethereum’s ability to support a growing ecosystem of DAPPs and users.
In addition, the Dencun upgrade will reduce Ethereum’s internal and rollup-related costs by 10 times, improving Ethereum’s scalability and cost-effectiveness. Specifically, the upgrade will reduce Ethereum transaction costs from the current average of $0.23 to $0.02, a change that could accelerate adoption of the Ethereum rollup roadmap. At the same time, lower costs will make L2 solutions more attractive and competitive.
Since EIP-4844 is able to reduce block space fees paid for rollups by more than 10x, the Dencun upgrade may reduce the Ethereum protocols fee revenue in the short term. The success of this upgrade can be measured by several metrics: L2 adopts the blob transaction type; L2 sorter fee payments are reduced; L2 transaction fees are reduced; blob fees are increased, making spamming data no longer economically viable; long-term Ethereum will be adopted for data availability (DA) rather than competing alternatives such as Celestia and others.
Impact on validators and staking operators
The expansion of staking services like Lido and Rocketpool (as well as staking volume from major players like Coinbase, Binance, and Kraken) has been one of the most important areas of active research in the Ethereum community to improve the security of the Ethereum network.
Ebunker believes that as the amount of ETH pledged increases, the consensus layer takes on greater pressure. A large number of validators results in an increase in gossip messages and an increase in the beacon state size, which currently occupies 16 TB on the archived Lighthouse node.
While it is possible to reduce the growth rate of message volume and beacon status by increasing the maximum effective balance (currently 32 ETH), introducing such changes requires a delicate balance that increases the threshold for Solo Ethereum validators.
Dencun upgrades are already working to address this issue, with some solutions (such as EIP-7514 increasing the Max Epoch Churn limit) slowing down the rate at which new validators join the network.
Market Impact of Dencun Upgrade
The Dencun upgrade may affect the market value of the Ethereum network, mainly in the following aspects:
Network function enhancement:The Dencun upgrade can significantly improve Ethereum’s transaction processing capabilities and reduce costs, and attract more developers and users into the Ethereum ecosystem. Increased efficiency and adoption of the Ethereum network will likely drive demand for ETH and have a corresponding impact on its price.
Investor perception:A successful deployment of Dencun could bolster investor confidence in Ethereum’s long-term viability and its development team’s ability to execute complex upgrades. This perceived reliability and forward momentum may impact the attractiveness of Ethereum as an investment, which may lead to an increase in the value of Ethereum investments.
Market Hype and Sentiment:Cryptocurrency markets are highly sensitive to investor sentiment. Anticipating positive news from the Dencun upgrade or market reaction to its successful implementation could lead to short-term price fluctuations, with traders and investors adjusting their positions based on the expected impact on Ethereum’s functionality and market position.
With the successful activation of the Dencun upgrade on the Ethereum test network and its full implementation on the main network in March, Ethereums transaction processing capabilities and efficiency will be greatly improved. Overall, the Dencun upgrade is a huge evolution for Ethereum, solving immediate and long-term scalability, security, and efficiency issues.
The EIP in this upgrade, designed to optimize data availability and staking operations, can significantly enhance the performance and user experience of the network. The Dencun upgrade addresses pressing challenges facing blockchain networks by implementing Proto-Danksharding and introducing blobs, and is a milestone in Ethereum’s ongoing efforts to improve its scalability and reduce transaction costs.
