Ethereum Foundation Successfully Launches Dencun

The Ethereum Foundation successfully launched the Dencun upgrade on the Ethereum mainnet on March 13, 2024. This was a major and highly anticipated network improvement that brought significant changes to how the blockchain operates, primarily by focusing on scalability and reducing transaction fees on Layer 2 (L2) solutions.

Key Features of Dencun

The name “Dencun” is a portmanteau of “Deneb,” the name for the upgrade on the consensus layer, and “Cancun,” the name for the upgrade on the execution layer. The upgrade included nine Ethereum Improvement Proposals (EIPs), with the most significant being EIP-4844, also known as proto-danksharding.

The core of proto-danksharding is the introduction of “blobs.” Here’s how they work and why they’re so important:

Blobs are a new type of data storage. Unlike traditional transaction data, which is permanently stored on the Ethereum blockchain (called “calldata”), blobs are temporary, large data packets that are attached to blocks. They are only stored by nodes for about 18 days.

Blobs are cheaper. By not competing with the main Ethereum transaction data for block space, blobs have their own separate and much cheaper fee market. This is a game-changer for L2 rollups.

Blobs enhance scalability. L2 rollups, like Arbitrum and Optimism, work by batching many transactions together and submitting them to the main Ethereum chain. Previously, they used the expensive calldata to do this. Now, with blobs, they can post this batch data much more cheaply and efficiently.

Impact of the Dencun Upgrade

The launch of Dencun has had several significant effects on the Ethereum ecosystem and its users:

Drastically Lower Fees on Layer 2s: The primary goal of the upgrade was to reduce transaction costs on L2 networks. This has been a huge success, with data showing average gas fees dropping by as much as 95% on some L2s in the year following the upgrade. This has made decentralized finance (DeFi) and other applications more accessible and affordable for a wider range of users.

Increased Network Efficiency: By providing a dedicated, cost-effective way for rollups to post data, Dencun has made the entire Ethereum ecosystem more efficient. This is a crucial step towards the long-term vision of a “rollup-centric” Ethereum, where L2s handle the majority of transaction volume, and the mainnet serves as a secure settlement and data availability layer.

Paving the way for Full Sharding: Proto-danksharding is a crucial, preliminary step toward full sharding, which will further scale the network by dividing it into smaller, parallel “shards” to process transactions.

Mixed Impact on Ethereum’s Mainnet Fees: While Dencun has made a massive difference for L2s, its impact on mainnet fees has been more nuanced. Mainnet fees remain a concern during periods of high congestion, but the overall optimization has contributed to a healthier network.

In summary, the Dencun upgrade was a landmark event for Ethereum, successfully delivering on its promise of making the network more scalable and affordable for the vast ecosystem of Layer 2 solutions. This has been a key step in Ethereum’s journey to becoming a high-throughput, globally accessible blockchain.