Ethereum Dencun upgrade will introduce "Proto-DankSharding", aiming to reduce the transaction cost of the L2 blockchain and solve scalability. 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 the core upgrade of Dencun. It can reduce transaction costs and reduce data availability costs for 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

Dencun upgrade is the abbreviation of Cancun-Deneb, where Cancun focuses on execution layer’s network scalability, while Deneb focuses on improving Ethereum’s consensus layer. 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 Dencun upgrade is included in each Activation on the test network. 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 version of the Ethereum client with Dencun functionality is expected to be released by February 22, and validators have about two weeks to install the update on their nodes client version.

Currently, Ethereum developers have shared information about Geth V1.13.12, also known as Edolus, and it is scheduled to be released on March 13 at 13:55 UTC. Block height 8626176 is undergoing Dencun upgrade on the main network. The date requires developer approval and confirmation via the open source software platform GitHub.

Technological innovations in Dencun upgrade

One ​​of the famous technological innovations introduced in Dencun upgrade is " blob”, 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 verification, 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 of each block does not exceed 128KB. As a result, block space is expected to increase by approximately 2MB. The additional data space will allow 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 transaction capabilities and costs

The implementation of the Dencun upgrade is expected to significantly improve Ethereum 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 the block space fees paid by rollup by more than 10 times, the Dencun upgrade may reduce the fee income of the Ethereum protocol 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's 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) instead of competing alternatives such as Celestia and others.

Impact on validators and staking operators

Staking service providers such as Lido and Rocketpool (as well as staking volume from major players such as 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 bears greater pressure. A large number of validators will lead to an increase in gossip messages and the size of the beacon state. The archived Lighthouse node currently takes up 16TB of space.

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 A delicate balance, this will increase the threshold for Solo Ethereum validators.

Dencun upgrade is already working on solving this problem, and some solutions (such as EIP-7514 increasing the Max Epoch Churn limit) will reduce the rate of new validators joining the network .

Market impact of Dencun upgrade

Dencun upgrade may affect the market value of the Ethereum network , mainly reflected in the following aspects:

Network function enhancement: Dencun upgrade can significantly improve Ethereum’s transaction processing capabilities and reduce costs, and attract more Developers and users enter 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: The successful deployment of Dencun can enhance investor confidence in the long-term viability of Ethereum and its development team's ability to perform 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 market reactions to the Dencun upgrade or 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, Ethereum's 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 aimed at optimizing 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.