Ethereum's Dencun upgrade

February 22, 2024
Updated: March 13, 2024
3 min read
ethereum upgrade

Since its launch, Ethereum has delivered on the promise of decentralized applications (DApps) and smart contracts. But to realize this vision on a global scale, Ethereum must continually improve. The Dencun upgrade is designed to improve scalability and efficiency. In this article, we'll discuss what this upgrade entails and what it means for the future of Ethereum.

A brief introduction to Dencun

The Dencun upgrade, short for Cancun-Deneb, was successfully implemented through a hard fork on March 13, 2024. It is the largest upgrade since April 2023. Dencun contains five EIPs: Ethereum Improvement Proposals. The most important of these is EIP-4844, also known as proto-danksharding.

Ethereum users are expected to pay lower gas fees on Layer-2 transactions after the introduction of proto-danksharding. These Layer-2s are an additional layer on top of the Ethereum blockchain. It can be an app, framework, or protocol, usually with a specific purpose such as improving scalability or speeding up processes. One well-known example of such a Layer-2 is Optimism.

What is proto-danksharding?

One of the most notable features of the Dencun upgrade is the implementation of proto-danksharding. To explain this, we must first explain sharding. This process divides the Ethereum blockchain into smaller segments, called shards, allowing transactions to be processed in parallel. This leads to significant improvements in throughput, resulting in faster and cheaper transactions.

Proto-danksharding is a new technology designed to reduce transaction costs by introducing data "blobs." Blobs are a new category for storing data. These blobs are only temporary and contain data about transactions. Instead of having to verify each transaction in a new Ethereum block, the network merely confirms that the blob attached to the block is true. Because the blobs are temporary, they take up a lot less memory.

Proto-danksharding is the first iteration of a new technique known as "danksharding." So it is an in-between on the way to full danksharding. Sharding is very complicated to implement, which is why the developers chose to do it in stages, and with extensive testing throughout the entire process.

Did Dencun make Ethereum cheaper?

Proto-danksharding is an important step that will ultimately lead to better scalability and lower costs. By making more space in the blocks and lowering gas fees for the Layer-2s, the use of Ethereum's DApps and the amount of deposits in smart contracts is potentially increased. With that, the demand for ETH goes up. The gas fees of the Ethereum blockchain itself, however, are not lowered right now.

In short, at this stage, the cost effect will be felt mostly on Layer-2s. But for the Ethereum network as a whole, it is an important milestone nevertheless.

The information provided in our articles is intended solely for general informational purposes and does not constitute (financial) advice.

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