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The Ethereum Dencun Upgrade, released on March 13, 2024, is expected to significantly reduce transaction fees for protocols built on top of the Ethereum network. The much-anticipated upgrade is also expected to improve overall network efficiency and scalability.  

This article explores what the Ethereum Dencun upgrade means, preceding upgrades that lead to the Dencun, its key features, and what it means for the Ethereum community.

  • Ethereum Dencun upgrade will impact the overall network’s overall scalability and efficiency.
  • Proto-danksharding (EIP-4844) is one of the key features of this upgrade, which introduces temporary data storage in transactions.
  • This Ethereum upgrade will primarily reduce transaction fees for layer-2 solutions.

What is Ethereum Dencun Upgrade?

Ethereum Dencun upgrade is a blend of two separate upgrades – Cancun and Deneb–, poised to introduce a series of changes designed to boost the network’s overall efficiency, scalability, and data availability. Cancun focuses on optimizing transaction processing and management in the execution layer while Deneb focuses on optimizing how network participants achieve consensus regarding the blockchain’s state.

What Does Ethereum Dencun Upgrade Mean for the Ethereum Network?

The Dencun upgrade steers Ethereum’s scaling efforts towards a more rollup-centric roadmap. When implemented, this upgrade will transform the network into a robust database for layer-2 blockchains, leading to more efficient and cost-effective data storage. 

For context, rollups are Ethereum protocols designed to handle transactions independently from the primary network. The goal of rollups is to increase transaction speeds while reducing transaction costs.

One of Dencun’s standout features is the proto-danksharding or Ethereum Improvement Proposal 4844 (EIP-4844), which introduces temporary data storage in transactions. In other words, this feature aims to enhance the network's scalability by optimizing the management of substantial chunks of data.

Ethereum Roadmap: It Began with ‘The Merge’

In September 2022, Ethereum made a historical shift from the energy-intensive proof-of-work consensus mechanism to a more energy-efficient proof-of-stake (PoS) solution. The Merge symbolized a shift towards an environment-friendly method of validating transactions. It also laid the foundation for innovations that were only feasible in PoS chains.

In April 2023, Ethereum implemented the Shapella fork, a consequential upgrade following the Merge. The Merge, while it allowed users to stake their tokens to the network’s consensus, the validators (network participants responsible for confirming transactions) and stakers could not withdraw their deposit or staking reward. 

The Shapella upgrade allowed validators and stakers to unstake and withdraw their staked ETH and staking rewards, partially or fully. Simply put, the Shapella upgrade simplified the staking process for users.

The upcoming Dencun upgrade is the pinnacle of Ethereum’s ongoing evolution journey, propelled by the preceding upgrades. With that said, it is poised as the most significant upgrade since the Shapella fork.

What Can Users Expect from the Dencun Upgrade?

Besides proto-danksharding or EIP-4844, the Ethereum Dencun also consists of other significant improvements such as:

Improved Staking Experience

Dencun also focuses on improving the overall staking experience for Ethereum users. Some of the changes encompassed in the upgrade are geared towards streamlining the process of making attestations and exiting the staking process

For instance, it aims to ease the processes of earning staking rewards for users hesitant to take on the technical responsibilities of full validators. This is achieved by introducing specialized delegated staking solutions, where the users can lock their ETH through a third party while still maintaining complete control over their ETH.

Leaving a delegated staking network previously entailed submitting a pre-signed exit message, which introduced the trust factor. The Dencun upgrade seeks to make these exit messages more permanent, ensuring that validators can exit the network without affecting future upgrades.

Consequently, the Dencun upgrade aims to optimize the network’s overall competitiveness and efficiency by addressing the issue of block attestation. In the current version, the validators have a limited timeframe for voting on the correctness of newly forged blocks. 

The Dencun upgrade proposes significantly increasing this timeframe. This will optimize the block confirmation process while increasing validators’ opportunities to earn rewards.

Improved Security and Performance

This ETH upgrade also aims to enhance the network’s overall security and efficiency. For instance, the upgrade is anticipated to significantly augment the communication efficiency between the network’s execution and consensus layers. 

This solves the historical communication barrier between these layers. Such a barrier ensures that every data block in one layer has a corresponding data block in the other, forcing them to operate as separate entities.  

The Cancun-Deneb upgrade simplifies the communication process by allowing the state of the consensus layer to be directly conveyed to the execution layer, without requiring trusted third-party oracles or a complex voting process.

Enhanced Cost-Efficiency

The upgrade also promises to improve cost efficiency by introducing transient storage and optimized smart contract execution. Transient storage means that the data vanishes upon completing a transaction. This optimizes block space and significantly reduces permanent data storage costs. 

Simply put, one of the improvements in the Dencun upgrade is steered to improve network efficiency and lower transaction costs. Consequently, the upgrade aims to optimize memory management within the Ethereum Virtual Machine (EVM), thereby enhancing the efficiency of smart contract processing.

Optimized Ethereum Growth Rate

One of the key improvements in the Dencun upgrade addresses the rapid increase in ETH staking. It involves addressing how many new validators can join the network simultaneously. This change focuses on steadying the growth rate of active validators rather than a rapid influx, which could lead to issues like centralization or increased complexity of specific tasks.

What’s Next?

The Dencun upgrade is anticipated to significantly lower Ethereum gas costs while increasing the network’s transactions per second. However, the promised fee reduction primarily impacts layer-2 users rather than directly impacting users interacting with the Ethereum main chain.  

The Dencun upgrade simply ushers in The Surge phase in the Ethereum developmental roadmap. The end goal for this phase is to reach a throughput of 100,000 transactions per second. Like other upgrades before it, Ethereum Dencun serves as another stepping stone in Ethereum’s vision of achieving scalability.  

Succeeding the Surge will be the update called` Scourge to mitigate centralization risks and then the Verge to simplify transactions and block verification. Next in line will be the Purge, which will simplify the protocol by eliminating unnecessary code, and, finally, the Splurge to “fix everything else.”

FAQs?

What change will the Ethereum Dencun upgrade bring?

The Dencun upgrade will lower the fees on layer-2 networks and will boost the overall scalability of the Ethereum network. 

When will the Ethereum upgrade go live?

The Cancun and Deneb is scheduled to go live on March 13, 2024. 

What’s next after The Merge upgrade?

The ‘Surge’ upgrade will be the next in Ethereum’s roadmap of converting to a Proof of Stake (PoS) blockchain. 

Disclaimer:
It is highly recommended to conduct thorough research prior to making any financial decisions. Please note that this article's purpose is solely for educational purposes and the author and the organization, M2, do not influence the reader's investment or trading choices.

Pooja Kadia
Author

With over 7 years of experience working for more than 200 web3 projects, Pooja is a content strategist and growth specialist for blockchain and Web3 companies. Her work has been published across leading publications which have garnered over 1 Million views. Her extensive experience in this field enables her to simplify complex blockchain concepts, making them easily understandable for diverse audiences.

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