Understanding Dencun, the biggest upgrade to Ethereum since The Merge
Editors:Noah Citron and Valeria Nikolaenk
Ethereum just underwent its biggest upgrade since The Merge last week. Called “Dencun” — a portmanteau of “Deneb” and “Cancun”, in keeping with a tradition of naming upgrades after stars and cities — Dencun bundled together nine proposed changes to the network.
Of these proposed changes aka Ethereum improvement proposals (EIPs), the most-anticipated was EIP-4844 — considered a major milestone on the road to scalability. EIP-4844 is also known as “protodanksharding” (as inspired by the names of developers Diederik Loerakker aka protolambda and Dankrad Feist).
Why it matters
So why does EIP-4844 matter? First, it introduced the concept of “blobs” — a place to store additional, temporary data on Ethereum blocks. Simply put, blobs are a new place to store rollup data that’s being added to the network. Rollups are layer two (L2) services that reduce the network’s load by processing transactions off-chain and then bringing them back on-chain. Since rollups only need this data temporarily, the blob-data is (mostly) forgotten by the blockchain afterwards.
And since blobs are ephemeral — like Instagram Stories (though in this case designed to expire after 18 days) — they lessen Ethereum’s dependence on permanent data storage. It’s also a step towards enabling Ethereum to store even more data blobs via data availability sampling.
Here’s a useful analogy from a16z crypto engineer Noah Citron to help sum up why all this matters:
● Think of Ethereum as a highway.
● Mainnet transactions are the people riding alone in cars.
● Rollups are the buses that group people, helping alleviate traffic.
● EIP-4844 basically adds a “dedicated bus lane” to Ethereum, making the network more efficient.
● The Dencun upgrade also paves the way for additional “bus lanes” to be added in future.
Benefits and results
Imagine if rollup data didn’t expire. That would add roughly 83.7 gigabytes of data to the blockchain every month (~31 days), and 985.5 gigabytes per year. This figure would only keep increasing, because remember: blockchains store info permanently. By regularly expiring, blobs limit the need for that exorbitant data storage — especially as the rest could get stored off-chain via rollups. [To get a more concrete sense of data size for blobs: There’s a target of 3 blobs per Ethereum block, at max 6 blobs per block. Each blob is ~128 KB of data (a vector of 4096 elements of ~32 bytes each).]
EIP-4844 has already drastically reduced costs. A transaction on rollup provider Optimism, for instance, costs less than one tenth of a cent right now [source: l2fees.info] — about 1000x cheaper than transactions cost before the upgrade. Note, these immediate cost savings are not likely to last: As more people stuff more transactions into rollups, fees will likely increase due to induced demand. [If you’re interested in tracking the blob fee market, check out this Dune analytics dashboard created by Citron: The dashboard shows both the current blob base fee as well as the percentage of the target base fee currently being used.]
Some suggest that the Dencun upgrade could settle anywhere between a 10x-1000x reduction in costs (this is purely an estimate). However, a future upgrade called PeerDAS or “full danksharding” is designed to make rollups much more efficient, increasing transaction throughput by another 32x. The key innovation there is adding more shards, and therefore more efficiency — yet without much additional cost. Full danksharding would therefore allow many bus lanes to be added for the price of just one bus lane — leading to potentially huge throughput increases in the future.
Implications and applications
Lower transaction costs matters for everyone, because cheaper transactions unlock entirely new categories of applications that didn’t make sense with higher fees.
Because Dencun also adds the concept of transient storage (EIP-1153) to the Ethereum virtual machine (EVM), smart contracts can now store bits of data only for the duration of a transaction — rather than permanently, or only during the execution of a particular call into a contract. This means developers can do a lot more cool stuff than before, and for a lot cheaper, because they now have a sort of “medium-term” memory for smart contracts. By analogy, think of what different types of volatile memory did for semiconductor innovation…
Other benefits of the Dencun upgrade for developers include more tools for liquid staking protocols to understand what’s happening on the beaconchain (from the EVM), which helps decentralize those protocols. Still another is the mcopy opcode, which, with Dencun, now makes some smart contracts involving memory much more gas efficient.
To summarize:
While the much-awaited “Merge” was one of the biggest technical feats yet — moving Ethereum from the more energy-intensive Proof of Work to Proof of Stake — we are now into the “Surge”, where ongoing updates can further scale Ethereum. This update, like all others, was in the making for a long time (Ethereum ran a trusted setup ceremony for it).
But most importantly, all of these upgrades are the result of countless developers around the world coordinating and contributing via open source.
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