March 13, 2024

Ethereum Implements Dencun Upgrade, Pioneering a Reduction in Data Fees

Ethereum's latest upgrade, Dencun, introduces 'proto-danksharding', creating dedicated space on the blockchain for data storage at a reduced cost, marking a significant milestone in the platform's evolution.

Ethereum, the second-largest blockchain globally, has activated its highly anticipated Dencun upgrade, aimed at catalyzing growth in layer 2 networks like Arbitrum and Polygon by slashing data fees.

The Dencun upgrade, technically classified as a hard fork, commenced at Ethereum epoch 269,568 at 13:55 UTC, concluding at 14:10 UTC.

A pivotal feature of this upgrade is the introduction of a new storage mechanism termed 'blobs', providing segregated space on the blockchain specifically for data storage, offered at a reduced cost compared to regular transactions.

Regarded as Ethereum's most substantial upgrade in nearly a year, Dencun represents a critical juncture in the platform's journey, addressing the long-standing issue of high transaction fees and igniting a competition among major layer 2 networks to leverage blockchain scaling changes.

During the official watch party hosted by EthStaker and the Ethereum Foundation, Terence Tsao, a core developer at Offchain Labs, revealed that significant rollups are withholding data blob submissions until the network stabilizes. The Arbitrum Foundation's X account announced plans to commence blob utilization within the next 24 hours.

What is proto-danksharding?

At the heart of the upgrade lies the implementation of proto-danksharding, a novel transaction category facilitating data storage on Ethereum through the utilization of data blobs.

While the primary beneficiaries of this upgrade are expected to be layer 2 networks like Arbitrum, Optimism, and Polygon, which facilitate Ethereum's scaling, by aggregating user transactions and consolidating them on the main blockchain, the impact will eventually extend to end-users, potentially reducing their transaction fees.

Dencun marks Ethereum's initial stride towards implementing sharding, a technical feature aimed at fragmenting the blockchain into miniature shards to enhance transaction throughput at a lower cost. However, the complete integration of sharding remains several years away, making proto-danksharding a provisional solution to address Ethereum's high gas fees.

Data availability solutions

Proto-danksharding is anticipated to benefit a new class of blockchains within the Ethereum ecosystem known as data availability (DA) layers. These layers, including Celestia, EigenDA, and Avail, assist networks in storing large volumes of data for rollups.

As rollups generate substantial data and consume significant Ethereum space, the demand for DA solutions has surged. Proto-danksharding aims to alleviate this strain, potentially reducing the costs associated with accessing DA data.

Layer 2 fee race

With layer 2 fees poised to plummet across Ethereum's rollups, speculation abounds regarding a potential fee war among these auxiliary networks, competing to attract users with lower transaction fees.

However, the exact ramifications remain unclear, with the full impact of proto-danksharding contingent on its implementation.

Steven Goldfeder, co-founder of Offchain Labs, emphasized the need for collaboration among rollup projects, anticipating adjustments in transaction fee structures across ecosystems.

Additional Dencun features

While proto-danksharding serves as the centerpiece of the Dencun upgrade, eight other Ethereum Improvement Proposals (EIPs) have been incorporated into the package, primarily targeting developers:

  • EIP-1153: Facilitating reduced fees for on-chain data storage, thereby enhancing blockspace efficiency.
  • EIP-4788: Enhancing bridge and staking pool designs.
  • EIP-5656: Introducing minor code enhancements for the Ethereum Virtual Machine.
  • EIP-6780: Eliminating code that could prematurely terminate smart contracts.
  • EIP-7044: Introducing minor code enhancements to improve the staking user experience.
  • EIP-7045: Expanding the attestation slot inclusion range.
  • EIP-7514: Slowing down the rate of staking on Ethereum.
  • EIP-7516: Assisting rollups in obtaining information regarding blob transaction costs.
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