Ethereum rolled out its Dencun upgrade, one of the biggest it has had in more than a year and a huge development in crypto news. Many feel that it is a crucial development in the Ethereum blockchain history. Complaints against Ethereum included very high transaction fees, and this upgrade is believed to be the catalyst for tackling that.
Many believe that this update could start off a race among the biggest of the layer-2 networks to make the most of these changes and properly scale their blockchains. Now that the upgrade has been launched on the Ethereum mainnet, what can we come to expect?
The Biggest Changes Coming from the Dencun Upgrade
What is Dencun and what can it help with? The layer-2 network has high hopes from this upgrade, though there have been hiccups early in the process. These are the biggest reasons for the development and launch of Dencun.
Proto-danksharding
Perhaps the biggest aspect of the upgrade is proto-danksharding. Proto-danksharding is a new transaction category that will hold data on Ethereum. It will do so through the introduction of what will be known as “data blobs.”
The main benefit of this upgrade isn’t necessarily to the users themselves. Rather, it will be for layer-2 networks like Optimism, Arbitrum, and Polygon. These networks help scale Ethereum through bundled transactions from users, then moving them back up to the main blockchain where they are settled into big batches.
This is known as rollup technology. Rollup networks have become a hot item in the Ethereum ecosystem, specifically over the last few years. With billions of dollars being deposited into these chains, they have seen much higher transaction volumes even compared to the base Ethereum chain.
After its implementation, the aforementioned layer-2 networks will be capable of posting that data directly to Ethereum as opposed to using transactional data fields that can be a bit on the clunky side. This new setup should make it far cheaper and more efficient for settling data for rollups. This should ultimately trickle down to end-users through a reduction of fees.
Ethereum has stated that Dencun is the first move in its ultimate goal to implement sharding. This feature allows the blockchain to be broken up into shards or mini-chains in order to take on more transactional processing at a cheaper rate. A full sharding implementation is still years off, so the move to Dencun is something of an interim solution to address the high gas fees Ethereum has traditionally had.
Layer-2 Fees
Among the various Ethereum rollups, layer-2 fees are set to drop drastically. That has led to speculation that it could create something of a “fee war” between the various auxiliary networks. They will all essentially be competing for the same user base by offering perpetually cheaper transaction fees.
Though no one seems to have a clear indication as to how that will play out, we should begin to see a clearer picture as to the full effect of proto-danksharding. Jesse Pollak, the creator of U.S.-based crypto exchange Base, estimates that so long as there aren’t major usage increases, fees could fall as much as 95%.
In the end, each cryptocurrency ecosystem decides how to price those transaction fees. Some experts feel that Dencun will be a rallying point for further collaboration between future rollup projects.
Karl Floersch, CEO of OP Labs – the developer firm working on the Optimism blockchain – said the following: “Scalability is the fundamental unlock that enables permissionless collaboration between developers across projects and teams. With EIP-4844 and Dencun, developers across the Ethereum ecosystem can more seamlessly build together. The upgrade will enable a group of loosely coordinated developers to actually build systems that provide overall experiences that will rival the user’s experiences we’re used to from top-down, centrally planned platforms.”
Data Availability Solutions
Another apparent benefit of proto-danksharding is that it will help a new class of blockchains entering into the Ethereum ecosystem called data availability (DA) layers. Certain DA layers like EigenDA, Avail, and Celestia all help networks so that they can store massive amounts of data specifically for rollups.
These DA’s are essentially separate blockchains that are specifically geared to prove that the data within each of these transactions exists and make it available if it is required. Rollups tend to produce a lot of data and consume the space on the Ethereum blockchain. Because of this, there is a need for DA solutions now more than ever. Through the implementation of proto-danksharding, costs of downloading DA data could be substantially cheaper.
Improved Security and Enhanced Developer Experience
Security improvements might not have been the central goal of Dencun, but there are several upgrades that came along to improve the overall security posture of the blockchain. This is, in part, because of EIP-4788, which is a communication link between the consensus layer – where validators act to protect the network – and the execution layer – where transactions are ultimately processed.
This security upgrade makes it more challenging for potential threats to exploit weaknesses in either layer in the midst of communication between the two layers. There is also EIP-6780, which changes how the ‘SELFDESTRUCT’ function of smart contracts work. Because of this feature, smart contracts can destroy themselves automatically. This, in turn, makes it tougher for attackers to abuse this feature, increasing general security for Ethereum’s smart contracts.
Competitive Edge for Ethereum
As mentioned previously, there will be a tight competition among blockchains to essentially undercut one another on fees to garner more users. Because the transaction fees of its blockchain are now substantially lower, Ethereum could become more attractive to users who would have otherwise stayed away.
This could lead to an even broader adoption of Ethereum across applications in decentralized finance (DeFi) and nonfungible tokens (NFTs). Reduced fees as it relates to layer-2 solutions also show that Ethereum is capable of evolving and developing in a way that it remains competitive with other blockchains.
Benefitting Users and Developers
Through proto-danksharding, costs for layer-2 scaling solutions based on the Ethereum blockchain will be much lower. This gives the average user a much more cost-effective experience, particularly when it comes to DeFi services and NFTs.
As a layer-2 solution, it bundles transactions up before moving them to the Ethereum blockchain. Dencun is able to keep some of that transaction data off-chain, which saves costs even further.
Another feature of Dencun is its ability to streamline the handling of transactions, plus the implementation of consensus mechanisms for developers. This creates a much smoother experience for developers, which makes it both easier and faster to not only build but deplyDApps on the Ethereum blockchain. With a better developer experience comes potentially innovative projects, which will only serve to benefit the Ethereum ecosystem.
Dencun is also critical in that it paves a road for future developments. That is because critical concepts have been introduced to make full danksharding a possibility, which will only help to further address the scalability issues facing the Ethereum blockchain.
