Ethereum is long awaited “Dencun” The upgrade has been activated, marking an important milestone for the growth and development of the blockchain. This technically complex hard fork, which occurred around Ethereum 269,568 at 1:55 p.m. UTC (9:55 a.m. ET), is expected to reduce data fees and drive growth on Layer 2 networks such as Arbitrum and Polygon. Despite the potential for market disruption from the upgrade, the price of Ethereum's native cryptocurrency, Ether (ETH), has remained relatively stable. However, it is worth noting that ETH is up 50% over the past month, in line with CoinDesk20 49% increase in the index over the same period.
The blockchain community is eagerly awaiting the highly anticipated Ethereum upgrade, which is considered the most significant in almost a year. The upgrade promises to revolutionize blockchain by introducing new data storage space on the blockchain called “blobs,” with a dedicated area separate from regular transactions and at a lower cost. This should usher in a new era to combat Ethereum's notoriously high transaction fees. Additionally, the upgrade has sparked a race among the largest Layer 2 networks to take advantage of changes in blockchain scaling.
During the official watch party Hosted by EthStaker and the Ethereum Foundation, Offchain Labs lead developer Terence Tsao revealed that some larger rollups are delaying the submission of data blobs to Ethereum until the network is more stable. However, the Arbitrum Foundation account X assured that it would start using blobs. Meanwhile, Layer 2 network Starknet has already confirmed that it has started submitting data blobs.
Blast, a layer 2 network, reported at least one victim due to issues with Ethereum's Dencun upgrade. Blast stopped producing blocks, but later tweeted that the issue had been resolved. A full analysis of the incident will be shared soon.
What is proto-danksharding?
The upgrade is focused on the implementation of “proto-danksharding” – an innovative transaction category that stores data on Ethereum through the introduction of data blobs. Although the main benefit of this upgrade is not directly aimed at Ethereum users, it will significantly benefit Layer 2 networks such as Arbitration, OptimismAnd Polygonwhich help scale Ethereum by aggregating user transactions and sending them back to the main blockchain for settlement in large batches.
Roll-up networks have become increasingly popular in the Ethereum ecosystem over the past few years, and users have already deposited billions of dollars into these chains. Recently, these networks have experienced higher transaction volumes than the base chain.
With the implementation of Dencun, Layer 2s will now be able to publish data to Ethereum in a more streamlined and efficient manner, avoiding the current cumbersome transactional data fields. This will significantly reduce settlement time and rollup costs, ultimately benefiting end users by reducing their fees. Dencun is the first step toward Ethereum's goal of implementing “sharding,” a technology feature that will split the blockchain into mini-chains to process more transactions at a lower cost. Although full implementation of sharding is still far away, Dencun's proto-danksharding is a promising interim solution to combat Ethereum's high gas fees. You do not believe me ? Check out the screenshot of the Beaconcha blockchain explorer. in, which shows the first Ethereum blocks after activating the Dencun upgrade!
Data Availability Solutions
Proto-danksharding is key to reaping the benefits of a new class of blockchains entering the Ethereum ecosystem, known as Data Availability (DA) Layers. Celestia, EigenDA, and Avail are some of the DA layers that help networks store large amounts of data for rollups. It is important to note that DAs are separate blockchains that prove that the data for these transactions exists and is readily available if needed. As rollups produce a lot of data and consume a lot of data space on Ethereum, the need for DA solutions has become even more crucial. Proto-danksharding therefore plays a vital role in reducing the costs of downloading DA data, making it a cost-effective solution.
Layer 2 fee race
With layer 2 fees dropping among Ethereum rollups, it appears a fee war could be on the horizon. These ancillary networks will compete fiercely for users by offering lower transaction fees. Although the full impact of proto-danksharding remains to be seen, it is clear that competition will be intense. In a recent interview with CoinDeskJesse Pollak, creator of Base, the layer 2 network of US crypto exchange Coinbase, said that unless there is a significant increase in usage, costs could drop by as much as 90% to 95%.
According to Steven Goldfeder, co-founder of Offchain Labs, the largest layer 2 Ethereum network based on TVL, each ecosystem will ultimately determine how it prices transaction fees. Goldfeder also pointed out that some competitors are setting Layer 2 fees at zero, which is unsustainable.
Other layer 2 experts believe that Dencun will encourage collaboration between stacking projects. They argue that scalability is the key to unlocking permissionless collaboration between developers on projects and teams. Karl Floersch, CEO of OP Labs, the company behind the Optimism blockchain, explained that with Dencun, developers in the Ethereum ecosystem can build together seamlessly. The upgrade will allow a loosely coordinated group of developers to create systems that deliver holistic experiences that rival user experiences on top-down, centrally planned platforms.
What else is there in Dencun?
The Dencun upgrade is primarily focused on proto-dank sharding, but developers should also note the eight other Ethereum Improvement Proposals (EIPs) included in the Dencun package, as they will significantly impact their work .
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EIP-1153: This helps reduce on-chain data storage fees, thereby improving block space.
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EIP-4788: Improves the design of bridges and marking basins.
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EIP-5656: a small code change that should improve the Ethereum Virtual Machine.
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EIP-6780: eliminates code that could terminate smart contracts.
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EIP-7044: a minor code change that should improve the staking user experience.
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EIP-7045: Extends the inclusion range of attestation locations.
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EIP-7514: will slow down the staking rate on Ethereum.
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EIP-7516: Helps rollups obtain information about the cost of blob transactions.