What Is The Ethereum Dencun Upgrade, And Why Is It Important?

What Is The Ethereum Dencun Upgrade, And Why Is It Important?

The Ethereum Dencun upgrade, combining Deneb and Cancun updates, introduces significant changes to enhance scalability and reduce fees. This upgrade, crucial for Ethereum’s future growth, facilitates cheaper transaction storage off-chain. 

What is Ethereum Cancun-Deneb (Dencun) upgrade?

Dencun combines two updates called Deneb and Cancun into one big change for Ethereum, touching both the part of Ethereum that reaches agreements (consensus layer) and the part that handles transactions (execution layer). 

The Dencun upgrade also brings a feature called Proto-Danksharding through EIP-4844, aiming to lower the costs for layer 2 (L2) storage solutions. It introduces a new kind of temporary data storage called “blobs,” which helps in making storage cheaper for rollup providers. 

Proto-danksharding is an early step towards full danksharding. It allows layer-2 solutions on Ethereum to keep large transaction data off the main network, similar to using a temporary storage space. This helps reduce costs for users of layer-2 solutions by keeping the main Ethereum network less cluttered and reserved for crucial transactions.

These blobs stay available on the network for about 18 days, or 4096 epochs, after which they are removed. However, even after removal, the validity of the data can still be checked with certain proofs.

This is a major system update in blockchain, and it started at a specific time in Ethereum’s history, rolling out completely in 15 minutes. This update aims to cut down fees for certain transactions and enable Ethereum to handle more activity.

Deneb focuses on improving the agreement part of Ethereum, making sure everyone on the network agrees on what’s happening. 

Cancun upgrades how transactions are done, making them smoother and more efficient. 

This addition is expected to significantly lower rollup costs, control the size of the blockchain, and accommodate more users while keeping the network secure and decentralized.

This big change comes after another important update last year, which let people take their Ethereum out if they had put it into the network before.

What will happen after the Ethereum Dencun upgrade?

Lower fees from rollups

This feature started on March 13, 2024, at 1:55 PM UTC, from epoch 269568. 

Major rollup providers like Arbitrum and Optimism have announced they will start using the new blob feature right after the upgrade. 

However, the exact time when each rollup will start showing lower fees might differ because each provider needs to update their systems to use the new blob space.

Off-chain transactions to keep the network costs low

The Dencun upgrade makes Ethereum better by allowing it to handle more users and transactions without raising costs too much. It also keeps the network spread out and not controlled by just a few.

Ethereum is focusing on improving “layer 2 rollups.” These are systems that help handle more users safely.

Rollups work by doing transactions separately and then sending a summary or proof back to the main network. This process costs money, which was high before because every network user had to keep the information forever.

The Dencun upgrade introduces Proto-Danksharding, making it cheaper to store these summaries. Now, they only need to be kept for about 18 days, reducing costs. Since rollups need about 7 days to handle withdrawals, the new 18-day limit is more than enough, keeping everything secure without needing more computer storage.

Impact all Ethereum consensus and validator clients

The Proto-Danksharding update (EIP-4844) requires changes to both the systems that carry out transactions and the ones that help agree on the network’s state. 

All the main programs used by Ethereum have been updated to reflect this change. 

People running these programs need to make sure they’re using the latest version to stay connected with Ethereum after the update. 

Remember, this info can get outdated, so always look for the latest updates. Also, the software used by validators, who help keep Ethereum secure, has been updated for this new change.

Layer 2 (L2) transactions can be stored in 2 ways

Transactions on Ethereum’s Layer 2 can now be stored in two ways

  1. in new, cheaper temporary blob space or 
  2. in the older, more costly permanent smart contract calldata. 

Blob space saves money by offering short-term storage, enough for all needed security checks. The permanent calldata, though more secure for long-term, costs more.

The choice between using blob space or calldata is usually up to the rollup providers, who decide based on how much blob space is available. 

If lots of people want to use blob space, they might have to use calldata to make sure transactions go through quickly.

Even though users might technically pick which storage they prefer, rollup providers typically make this decision to keep things simpler and costs lower. For more details on how this works, you should look at the information given by the rollup providers.

Enhanced security with EIP-4788 and EIP-6780

The Dencun upgrade wasn’t mainly about security, but it did bring in some improvements to make Ethereum safer.

Part of the update, EIP-4788, helps the parts of Ethereum that check transactions and the parts that carry out transactions talk to each other better. This could make it harder for attackers to find and exploit weak spots.

Another change, EIP-6780, is about altering the way smart contracts can end themselves through the “SELFDESTRUCT” function. By tweaking how this works, it’s harder for bad actors to misuse this function, which could lead to better overall security for Ethereum smart contracts.

Lower costs on Layer-2 solutions

The Dencun update has introduced a new method for Ethereum’s Layer-2 scaling solutions that lowers the cost of transactions. 

These Layer-2 networks group many transactions together to save money before sending them to the main Ethereum network. 

The key feature of Dencun, called proto-danksharding and introduced in EIP-4844, reduces Layer-2 costs by allowing these networks to store certain transaction information outside the main blockchain.

Will the 4844 update lower the cost of gas on Layer 1 (L1)?

Not really. 

The update brings in a new way to charge for something called blob space, used mainly by rollup providers. Moving rollup data to blobs might lower fees on L1 a bit, but the main goal is to cut costs on Layer 2 (L2). Any decrease in L1 fees would be a small, indirect result.

The lessening of L1 gas costs depends on how much the rollup providers use the new blob data. But since L1 is used for lots of other things too, its costs might stay competitive. 

If rollups start using blob space, they will use less L1 gas, which could help reduce L1 gas prices for a while. 

However, blob space has its limits; if it gets too full, rollups will need to use the old, more expensive storage, which could make gas prices go up again for both L1 and L2.

How do you get old blob data?

Regular Ethereum nodes keep the latest network information, but they can throw away old blob data after about 18 days. Before getting rid of it, Ethereum makes sure everyone who might need it has a chance to:

  • Grab and save the data if they want.
  • Finish any dispute periods for rollups.
  • Complete the transactions for rollups.

People might want old blob data for different reasons, and there are a few ways to get it:

  • The Graph uses a network of node operators paid in cryptocurrency to keep this data.
  • BitTorrent lets volunteers store and share the data.
  • Ethereum’s portal network is working to let people access all Ethereum data through a network similar to BitTorrent.
  • Individuals can also keep their own copies of any data they find important.
  • Rollup services might keep the data to make their services better.
  • Block explorers use special nodes to collect and keep all this information, making it easy to look up past data on the web.

When getting old data back, you just need one reliable source to check it against the current network state.

How does this upgrade fit into the larger plan for Ethereum?

Proto-Danksharding is a preparatory step towards fully adopting Danksharding. 

Danksharding aims to spread out the storage of transaction data among different network participants, so no single one has to store everything. 

This method will allow more data to be included in each block, helping Ethereum grow to support more users and transactions.

Such growth is key for Ethereum to serve billions of people affordably and run more complex applications while keeping the network spread out and not controlled by just a few. 

Without these updates, the equipment needed to run the network would become too costly, possibly leaving only a few large players in charge, which would conflict with Ethereum’s goal of being decentralized.