Unlocking the Future: Ethereum’s ‘Dencun’ Upgrade Slashes Fees on the Blockchain!

Ethereum developers are gearing up for the highly anticipated Dencun upgrade, set to introduce the biggest code change to the blockchain in over a year.

Dencun, which is a portmanteau of Deneb and Cancun, will consist of two simultaneous upgrades on Ethereum’s consensus and execution layers.

Scheduled to take place at 13:55 UTC (9:55 a.m. ET), Dencun – technically known as a “hard fork” – is expected to bring more affordable fees for the growing number of auxiliary networks, also known as layer-2 (L2) “rollups,” that operate on top of Ethereum. This will be made possible by the activation of the Ethereum Improvement Proposal (EIP) called “proto-danksharding,” or EIP-4844, which aims to enhance the blockchain’s ability to handle data from L2 networks.

The Dencun upgrade has been in the works for several years, but was delayed from its original target date of late 2023 due to some engineering concerns. Since then, developers have successfully tested the upgrade on three separate test networks (testnets), with the only hiccup occurring during the first test on Goerli, which was quickly patched and resumed running smoothly.

To celebrate the official launch of Dencun, some Ethereum enthusiasts have organized watch parties, with the developer community EthStaker and leading Ethereum infrastructure team Nethermind hosting livestreams.

“We are making sure all of our clients and bootnodes are fully updated and ready for the fork,” said Barnabas Busa, a DevOps engineer at the Ethereum Foundation. “Our monitoring infrastructure is scaled up to ensure we don’t miss anything important.”

What is Dencun?

Dencun is set to be the most significant update to the Ethereum network since the Shapella upgrade in April 2023, which enabled withdrawals of staked ether (ETH).

The upgrade includes a number of code changes, but the main one is “proto-danksharding,” which introduces a new approach to storing transaction data on Ethereum known as “blobs.”

This will particularly benefit L2 networks such as Arbitrum, Optimism, and Polygon, which help to scale Ethereum by bundling up transactions from users and then passing them to the blockchain to be settled in batches. These L2s have become popular venues for transacting on Ethereum, with billions of dollars in deposits and consistently higher transaction volumes than the main Ethereum chain.

After Dencun, L2s will be able to post data to Ethereum within the dedicated “blobspace” instead of paying a higher cost to squeeze the data into conventional transactions. This will improve the efficiency of L2 settlement, ultimately reducing fees for end-users.

While this is Ethereum’s first attempt at “sharding” – a technique to split the blockchain into smaller chains to process more transactions – a fully functional version is still years away. However, proto-danksharding is expected to address the issue of high gas fees in the short term by reducing costs for L2 networks.

‘Proto-danksharding’

In addition to L2 networks, the upgrade will also benefit a new category of blockchains that have joined the Ethereum ecosystem, known as data availability (DA) layers. These include Celestia, EigenDA, and Avail, which help networks store large amounts of data – something L2s often rely on. With proto-danksharding, the cost of downloading data from these DA layers is expected to decrease.

In an interview with CoinDesk, Polygon co-founder Jordi Baylina explained that “prices should go down mainly because it’s a matter of supply and demand. Your supply is bigger, the data availability on Ethereum is going to be bigger, so the price should go lower.”

“By how much? We don’t know, it’s difficult to predict,” Baylina added.

Following Dencun, Ethereum developers will focus on the next upgrade, Electra + Prague (Petra.) While the specific changes have not yet been decided, a strong candidate is an upgrade called “Verkle Trees,” which is expected to improve the blockchain’s ability to store large amounts of data.

“Scalability is the key to enabling permissionless collaboration between developers across projects and teams,” said Karl Floersch, CEO of OP Labs, the primary developer firm behind the Optimism network. “With EIP-4844 and Dencun, developers across the Ethereum ecosystem can more seamlessly work together.”