What is the Ethereum Dencun Upgrade? What is its meaning and function?

Ethereum Dencun Upgrade: Unlocking scalability and efficiency

Ethereum has undergone many changes since its launch in 2015, with the Dencun upgrade implemented on March 13, 2024 being one of the biggest.

The Dencun upgrade includes nine improvements designed to enhance network scalability, reduce transaction fees and improve security.

This upgrade introduces raw danksharding to Ethereum, which cuts Gas fees by enabling the network to process Layer 2 (L2) transaction data more efficiently.

The original danks sharding is made possible by a new type of data called a blob, which is purged from the blockchain rather than permanently stored.

Launched in 2015, Ethereum is both a blockchain and a decentralized open source software platform. It was created to address some of the obvious technical limitations of Bitcoin in processing complex financial transactions. Today, Ethereum's native crypto tokens Ether (ETH) and Bitcoin are the two most valuable cryptocurrencies on the market.

Ethereum is appealing to developers who want to leverage its blockchain technology, making it a hub for innovation. Blockchain has become home to a large number of decentralized, smart contract-based applications (DApps) and is the granddaddy of the decentralized finance (DeFi) ecosystem. DeFi has ushered in a blockchain-based economic revolution, enabling users to access banking services, obtain loans and mortgages without traditional financial institutions.

As traffic on the Ethereum network grew, scalability became an issue as it struggled to keep up with the influx of new users. As a result, trading has slowed and the fees users pay to execute exchanges, known as gas fees, have steadily climbed. A Layer 2 network (or L2 network) built on the Ethereum blockchain helps alleviate network congestion by separating most of the transaction activity from the main chain. However, the way L2 has to settle transactions on the mainchain and the way the resulting data is stored is costly and inefficient.

On March 13, 2024, the blockchain underwent a series of nine Ethereum Improvement Proposals (EIP), collectively known as the Dencun Upgrade. The hard fork is designed to improve the scalability and efficiency of the network while reducing transaction fees for the L2 network, passing the savings on to end users.

The Dencun upgrade (whose name is derived from a combination of the project names Deneb and Cancun) is considered the most significant event in the history of Ethereum since the "merger" in September 2022. During the merger, Ethereum got rid of computer power - the intensive proof-of-work consensus mechanism used to verify transactions in favor of proof-of-stake, which requires less energy expenditure.

Next, we'll delve into the specifics of Dencun's upgrade and what it means for users, payments, and the future of Ethereum.

Learn about the Dencun upgrade

Although the Dencun upgrade includes nine different ips, the most important component is IP-4844, which introduces the original danksharding to Ethereum. Original danksharding enables the network to process a larger number of transactions over the L2 network without reducing reliability or speed, thus significantly cutting Gas bills. It does this by creating a whole new type of temporary data called a "blob," which is purged from the chain after a certain period of time.

expandability

Ethereum's future growth depends on the ability to complete more transactions faster and at a lower cost. Dencun will enable Ethereum to process data from the L2 network more efficiently, and the resulting lower Gas charges are intended to attract more developers to join the platform.

Petrol cost

Blobs allow L2 data to be moved more efficiently to the main chain and then discarded after a period of time. According to the Ethereum Foundation, this data was previously kept permanently on Ethereum, with storage costs accounting for more than 90% of the fees incurred by L2 Rollup users. One week after the Dencun update went live, Gas rates for the L2 network integrated with the update dropped by more than 90%.

secure

The two ips included in the Dencun upgrade (EIP-4788 and EIP-6780) are designed to enhance network security. The former enhances communication between the Ethereum consensus (verification) layer and the execution (processing) layer, which could make it more difficult for potential attackers to exploit weaknesses in either layer. EIP-6780 introduces changes to the self-destruct mechanism of smart contracts, designed to make them less vulnerable to malicious actors.

Cross-chain communication

The EIP-4788 in the Dencun upgrade also improves cross-chain communication, making interactions between the main Ethereum blockchain and L2 solutions more seamless and secure.

Data storage

An L2 network called rollups bundles up off-chain transactions and then transfers them to Ethereum for bulk settlement to reduce traffic on the mainchain. Prior to Dencun, network nodes would retain L2 data on Ethereum forever, passing on the cost of their growing storage needs to end users.

Proceed to complete danksharding

The original danks sharding is a stepping stone to Ethereum's full danks sharding leap, a key goal of its post-merger phase, known as the "surge." At the heart of Surge is the exponential expansion of Ethereum to strive for mass adoption, and danksharding will play a key role.

What does Dencun mean for payment

The Dencun upgrade should have an overall positive impact on cryptocurrency consumers, resulting in cheaper and faster payments on the L2 network. This will not have any negative impact on iCronPay users and there is no need for our customers or merchants to take any action. Many of the other ips included in the upgrade do not directly affect end users.

Another important thing to note is that the reduction in Gas fees unlocked by Dencun will only affect true L2 networks, such as Optimism, Arbitrum, and Base. Polygon uses its own blockchain, so it is not a true L2 solution and may not save any money.

Looking ahead, what's next for Ethereum?

With the launch of Dencun's upgrade, the key limitations in fees and data storage that have hindered mass adoption of Ethereum in the past no longer exist. There are high hopes that the radical elimination of Gas fees will encourage a large number of developers to flock to the platform and no longer be discouraged by the shortcomings of its former Dencun. This could lead to a new wave of innovation on Ethereum that was not possible before. Full Dank shards on Ethereum are probably still a few years away. But the Dencun upgrade brings Ethereum one step closer to its ultimate goal of 100,000 transactions per second on founder Vitalik Buterin's network.