What Is the Ethereum Dencun Upgrade?

Abstract

The Dencun upgrade, part of The Surge stage, represents a significant technological advancement.

EIP-4844 is the most notable upgrade in Dencun. In addition, the Ethereum Dencun upgrade also includes other improvement proposals: EIP-7514, EIP-1153, EIP-4788, EIP-5656, and EIP-6780.

Several critical areas to watch in Ethereum's progress, including Layer 2, Modular Blockchain, Full-Chain Games, Zero Gas Fees, and Layer 3.

Dencun is expected to be activated on the network in January 2024.

What is the Ethereum Dencun upgrade?

The term "Dencun" is a fusion of two essential components: "Cancun" and "Deneb". The Cancun upgrade focuses on enhancing Ethereum's execution layer (EL), while Deneb refers to the consensus layer (CL) upgrade. Therefore, "Dencun" is a joint term referring to these two major advancements coming to Ethereum.

Vitalik Buterin, the founder of Ethereum, once outlined the future upgrade roadmap for Ethereum 2.0 in six concise stages: the Merge, the Surge, the Scourge, the Verge, the Purge, and the Splurge. Each stage revolves around a specific theme and introduces new functionalities. The Dencun upgrade, part of the Surge stage, represents a significant technological advancement.

The Surge is designed to tackle the scalability issues that have persisted in blockchain technology since its inception. It empowers Ethereum to achieve performance levels of up to 100,000 transactions per second (TPS), comparable to the speed of traditional electronic payment systems like Visa. This upgrade is made possible through Danksharding ("DS"), a technique involving sharding. Proto-Danksharding (EIP-4844) represents the initial phase of Danksharding, marking a significant milestone in the Deneb-Cancun upgrade, also known as the Cancun upgrade. It serves as a crucial step for Ethereum to implement sharding and fulfill its scalability roadmap.

Furthermore, the Scourge comprises a series of upgrades aimed at alleviating the centralization of Miner Extractable Value (MEV). The Verge is designed to streamline blockchain verification methods. The Purge is designed to simplify the protocol and make nodes lighter by eliminating the burden of storing historical data. The Splurge refers to a series of miscellaneous upgrades for the Ethereum network, including account abstraction, multidimensional EIP-1559, verifiable delay functions, and more.

What does the Ethereum Dencun upgrade mainly include?

EIP-4844 is the most notable upgrade in Dencun. However, there are other significant EIPs as well. This article will delve into the key EIPs within the Dencun upgrade.

EIP-4844

EIP-4844 is an Ethereum upgrade that aims to reduce transaction fees. It introduces a new transaction type known as "blob-carrying transactions", which are essentially similar to regular transactions but with an additional set of data called a blob (Binary Large Object). Blobs prove to be more efficient for storage compared to Call Data, the current method for storing data in transactions. Call Data is a major cost factor for Layer 2 transactions, currently accounting for more than 80% of Layer 2 transaction fees. In the event of malicious validator activity on Layer 2, the entire Layer 2 chain can be reconstructed by using the Call Data published on Layer 1. In addition to introducing blob-carrying transactions, EIP-4844 will also implement execution layer logic, verification rules, multi-dimensional gas fee markets, and other system changes necessary for the future full sharding. It is important to note that, while EIP-4844 includes the majority of the logic for full danksharding, it does not directly implement any actual sharding itself.

EIP-7514

In September 2023, Ethereum core developers proposed EIP-7514 as part of the Dencun upgrade. The main goal of EIP-7514 is to slow down the expansion of validators on the Ethereum network, reserving more time to study the future and potential solutions for Ethereum staking. This is a response to concerns about the concentration of staking power in the hands of a small number of entities, such as the Lido staking service. Lido currently holds nearly 1/3 of all staked ETH and has no intention of self-limiting. Dankrad Feist, a researcher at the Ethereum Foundation, believes that this concentration of power could pose a risk to the network's decentralization. He argues that the Ethereum community needs some time to figure out the future of Ethereum staking. EIP-7514, as a temporary solution, may be beneficial by reducing validator churn—essentially, limiting the number of validators that can enter to become active validators each epoch.

In addition, the Ethereum Dencun upgrade also includes four other improvement proposals: EIP-1153, EIP-4788, EIP-5656, and EIP-6780. The EIP-1153 introduces the "transient storage" opcode. This opcode allows for the storage of values that are automatically discarded once the transaction processing is completed, without being persisted into long-term storage. According to the explanation provided by the Optimism team, this proposal has the potential to save users up to $3 million in gas fees on Uniswap alone. EIP-4788 can enhance the design of bridges and staking pools by enabling the public exposure of the beacon chain block root in the Ethereum virtual machine. This feature empowers dApps to refine their trust assumptions, making it easier to develop applications such as staking pools and bridges. EIP-5656 introduces a new instruction that enables developers to copy a specified memory area. This instruction proves to be highly valuable for computationally intensive operations, like EVM 384, where memory copying represents a major expense. EIP-6780 modifies the functionality of the SELFDESTRUCT opcode. The main objective of this proposal is to eliminate code that can prematurely terminate smart contracts.

What are the new narratives for Ethereum under a bull market?

In the context of Ethereum's technological evolution, its modular technology stack undergoes three stages. 1. Monolithic Blockchain: Represents Ethereum Layer 1 or the primary chain, functioning as a monolithic blockchain itself. 2. Rollup: Functions as a Layer 2 solution for execution, exemplified by platforms like Arbitrum and Optimism. This stage separates the execution layer from Ethereum Layer 1 and publishes state roots and rollup data back to Ethereum Layer 1. 3. Modular Rollup: Introduces a rollup architecture with modular data availability. This article points out several crucial areas to watch as Ethereum progresses. These include Layer 2, Modular Blockchain, Full-Chain Games, Zero Gas Fees, and Layer 3.

Layer 2

The central focus of the Dencun upgrade centers around EIP-4844, as mentioned earlier. This improvement proposal seeks to significantly reduce the cost of Layer 2 and improve its scalability, thereby unlocking the potential for substantial growth in related applications. Additionally, initiatives like Op Superchain are dedicated to establishing a unified ecosystem for Layer 2 interconnectivity, treating Op Stack as a public asset. This strategy carries significant potential for future applications. Among the anticipated projects within the Layer 2 ecosystem are Optimism, Arbitrum, zkSync, and StarkNet, with Optimism and Arbitrum already having launched tokens. Additionally, Polygon has experienced rapid development and established Web3 partnerships with prominent brands like Starbucks, Disney, Adidas, and PRADA.

Modular Blockchain

A modular blockchain manages only a few focused tasks, delegating the rest to one or more independent layers. Modular blockchains can be used to handle the following single tasks or combinations of tasks:

Execution: Supports transaction execution and facilitates the deployment and interaction with smart contracts.

Data Availability: Ensures the availability of transaction data.

Consensus: Permits the content and order of transactions.

Settlement: Utilized to complete transactions, resolve disputes, verify proofs, and bridge between different execution layers.

A rollup is an Ethereum scaling solution that functions by executing transactions off the main Ethereum blockchain but posting transaction data on Layer 1. Rollups currently stand as the preferred Layer 2 solution for scaling Ethereum. In modular blockchains, the Data Availability (DA) layer is also worth noting. It acts as an immutable bulletin board where transaction data and proofs are published. Without DA, rollups cannot ensure liveness. Leveraging the transaction data from the DA layer allows anyone to continue computing the next block seamlessly from where the previous process stopped. Ethereum is in the process of developing a dedicated fee market and "blob" space for rollups, and projects like Celestia and Avail prioritize lightweight implementations with a dedicated DA layer.

Full-Chain Games

In the realm of full-chain games, the most noteworthy is DAW. DAW, which stands for decentralized autonomous worlds, is a subset of full-chain games, characterized by being entirely on-chain, open-ended, and having no pre-set gameplay. By providing publicly accessible programmable interfaces, DAW empowers players to freely create, enhance, and expand their gaming experiences within the realm of this digital-physical reality, thereby extending the boundaries of the game's narrative. In October 2022, the Lattice team launched OPcraft, a fully on-chain 3D game inspired by Minecraft, which garnered significant attention from the market.

Layer 3

The concept of Layer 3 in the blockchain industry currently lacks a widely accepted definition. Vitalik Buterin believes that it is too early to clarify its definition now, as the architecture of the multi-rollups ecosystem is still under development, and most discussions are still at the theoretical level. However, Vitalik shared three potential scenarios for Layer 3 in the future: 1. Layer 2 is used for scaling, and Layer 3 is used for customized features such as privacy protection. 2. Layer 2 is used for general scaling, and Layer 3 is used for customized scaling. 3. Layer 2 is used for trustless scaling (Rollups), and Layer 3 is used for semi-trustless scaling (Validiums).

Zero Gas Fees

Gas fees have been a major hindrance to the widespread adoption of Ethereum. In an effort to address this issue, GasZero, currently operating on a testnet, has emerged as a Layer 2 network presenting a novel solution: no Gas fees for trusted end-users. On GasZero, users can engage with decentralized networks and smart contracts without the requirement to pre-fund tokens in their wallets. However, it's important to note that the project is still in its early stages and requires thorough testing.

Latest news on Ethereum Dencun upgrade

On December 1, 2023, Christine Kim, Vice President of Research at Galaxy, released a summary of the 123rd Ethereum Core Developers Consensus (ACDC) call. The key points are as follows: The Dencun upgrade (Cancun/Deneb upgrade, corresponding to the execution layer and protocol layer) was activated on Devnet #12 on November 30. Currently, Teku, Lodestar, and Lighthouse client software, as well as all execution layer (EL) client software, are undergoing testing on Devnet #12. Additionally, developers identified a validator exit issue on Devnet #11 and the Nimbus client team is actively working on a solution for this issue. Despite that, Devnet #11 will remain operational until the problem is resolved. As the CL client Prysm has not yet joined Devnet #12, developers reached a consensus to postpone the planned Goerli shadow fork until the Prysm client software is ready for testing. Tim Beiko suggested launching the Goerli shadow fork at some point before the end of the year.

When will the Dencun upgrade begin? Ethereum client developers previously confirmed that the anticipated Dencun upgrade would not be implemented in a network hard fork before the end of 2023. In the latest update, during the Ethereum core development meeting on December 8, the development team is well-prepared for the upcoming testnet fork, with plans for a substantial Goerli shadow fork in the coming weeks. The developers agreed that, if all goes well, they will set a Goerli fork date to activate Dencun on the testnet in January 2024.

Summary

The Dencun upgrade is a critical milestone in enhancing Ethereum's scalability. The primary focus of this upgrade is EIP-4844, a crucial component that effectively lowers transaction fees for Layer 2, paving the way for significant growth in the Layer 2 scaling solutions. Additionally, it is essential to keep an eye on developments in modular blockchains, full-chain games, and Layer 3.