2024 has been a pivotal year for the financial sector because of the non-stop boom of Artificial Intelligence and the landmark approval of Bitcoin ETFs in the United States. Because of this there is a major capital inflow from Wall Street and the acceptance by Boomers and GenX for the digital assets also grew profoundly.
Adding to the revolutionary changes in the cryptocurrency market, Ethereum has been working on an upgrade which not just increases its network efficiency but also broadens its network accessibility and makes it a major stone for development and execution of smart contracts. This upgrade is called - DENCUN Upgrade.The implementation of the Dencun EIP 4844 Upgrade stands as a significant advancement, reducing transaction costs across its network.
What is Dencun Upgrade?
To explain it simply imagine Ethereum as a busy road that's now expanding into a superhighway. This upgrade will allow more transactions to happen at the same time just like more cars on wider roads making everything faster and cheaper. The Dencun Upgrade is expected to boost ethereum's transaction speed remarkably from 30 transactions per second to 1000s . The Dencun Upgrade is like expanding the busy road(Ethereum) to have more lanes and introducing a more efficient toll system which allows more cars to pass through at a lower cost. This makes the whole journey transaction process faster, cheaper and safer.
Ethereum as a busy road before Ethereum after Dencun upgrade
A critical component of the Dencun upgrade is Protodank Sharding which is a step towards implementing full dank sharding. This involves the use of large units of data that allow transactions to carry more information at lower costs; this is expected to make transactions on ethereum cheaper and more efficient.
This upgrade will also focus on enhancing the security features of ethereum and refining the overall user experience; this means that the network will be more secure for transactions and easier to use for both developers and end users.
The Dencun upgrade will incorporate several EIPs which are proposals made by the ethereum community to improve various aspects of the network these include:
EIP 4844 ProtoDank sharding
EIP 1153 for efficient data storage
EIP 4788 enhancing cross-chain Bridges and staking pools
EIP 5656 modifications for better performance
EIP 6780 deprecating the self struct function in smart contracts
Ethereum’s Protodank Sharding - EIP 4844
Sharding
This just simply means dividing ethereum’s network into small “shards”. These work on its own with their own set of validators and operate independently. Consider a team which works on a project but different people work on different aspects by dividing the work and then uniting all the work individually done by people to a collective project. Dividing the work separately is called sharding and then unifying for the project is called unsharding.
EIP 4844 is a step towards a more efficient Ethereum ecosystem which is built upon L2 rollups.
Rollups are the backbone of ethereum scaling, with the advancement of Optimistic and ZK rollups the gas fees have drastically gone down by 8-10 times as compared to the ethereum network but even this is high since not every user can afford it.
EIP 4844 offers ‘blob transactions’ for future cost effective ethereum transactions. Blobs are special kinds of transactions that incorporate large, fixed size data chunks which helps in reducing the growth of block sizes. These are data units that are attached to Ethereum’s existing blocks which provides specific storage for L2 rollups, this helps in keeping operations at low cost. The blobs are temporarily stored in beacon nodes and the size of these are small enough to ensure manageable disk usage.
Beacon node
A validator beacon node tells the validator what work to do and broadcast’s the validators work to the Ethereum network as the validator performs its duties. A beacon node simply maintains a view of the beacon chain and shard chain, while validators actively mine and validate new blocks (earning rewards in the process).
Technical working of EIP- 4844
Simplifying Network Complexity
This is done by introducing a merged fee market. In a traditional system which had multiple shards and distinct block proposals, ethereum will now have a single proposer for all transactions and data in a slot.
Because of the single proposer we will now have a more unified system. So, to not overburden validators, EIP 4844 introduces a concept of Proposer/Builder Separation (PBS)
Block builders are the specialized actors that bid for the right to choose the slot’s content. The proposer then selects the highest bid valid header. It separates gas and blobs, giving each its own gas prices and limits. This separation means that only the block builder processes the entire block, while others can verify it efficiently through data availability sampling. So, now every validator does not need to process the entire block which means less energy consumption, faster transactions and low gas fees.
Process:
With every regular transaction a data transaction is attached, these data transactions are matched to the blob contents which are present on the beacon node. These nodes do not fully download data blobs but they instead verify them indirectly through data availability sampling (DAS). Only the block builder node downloads the full beacon chain as shown in the figure
Adaptive Gas pricing Model
The gas pricing model self adjusts based on the network’s blob consumption. It determines the gas pricing by using an exponential formula, balancing usage and cost as network traffic varies.
Benefits of Dencun Upgrade
Huge Reduction in Transaction fees: Blob transactions along with merged fee markets can lead substantial reduction upto 100x in transaction fees for rollups. This will greatly contribute in mass adoption of L2 solutions
Data Pruning - Data Pruning means that the data will be available only for a special period of time. This eliminates the need for long term storage which is cost friendly as well as eco-friendly.
Increasing flexibility for future network upgrades: By using a dedicated data layer Ethereum can adapt to future changes more easily. This flexibility will allow different teams to specialize in their respective areas, fostering ongoing innovation within the Ethereum Ecosystem.
Improved User Experience - Lower transaction fees will help users to make more cost effective transactions, making Ethereum more popular for Defi, NFTs and much more applications
Developer’s Choice - With all the advancements in its technology to make ethereum more competitive in the Crypto Market it will become developer’s top choice to build upon it.
Conclusion
Reduced gas fees and improved scalability are poised to significantly enhance the user experience on Ethereum, thereby increasing the accessibility and affordability of decentralized applications. With Ethereum pioneering innovative upgrades, it establishes a benchmark for other blockchains, prompting them to evolve and remain competitive in the dynamic landscape of blockchain technology.
Dencun Upgrade represents a notable advancement in Ethereum's endeavors to enhance scalability and reduce transaction expenses. These enhancements are expected to solidify Ethereum's standing in the cryptocurrency sphere, drawing in additional developers, users, and businesses searching for a proficient and economical blockchain platform.
The upgrade aims to improve the efficiency of layer 2 roll ups Solutions built on top of the ethereum blockchain and significantly reduce gas fees. The cost of conducting transactions on ethereum.