Crypto can get complex. As an explainer, my goal is simple - make it make sense. Today we start our look at Ethereum's big Dencun upgrade which takes place today.
Ethereum is the second largest crypto after Bitcoin. It lets people build apps using smart contracts. But apps have been slow and pricey due to traffic. Dencun aims to fix that by making Ethereum faster and cheaper to use.
On March 13th, Ethereum gets some tune-up love with Dencun. It's named after two upgrades mashed together - Cancun and Deneb. Dencun will try shrinking costs and speeding things up using "proto-danksharding".
Stick with me as we check out what Dencun does, how it may help yet also what risks there are. Let's learn what this upgrade's about and what it could mean for Ethereum's future
What is Dencun
EIPs/EIPS/eip-4844.md at master · ethereum/EIPs
The Ethereum Improvement Proposal repository. Contribute to ethereum/EIPs development by creating an account on GitHub.
Gas is a pain in crypto. Every transaction on Ethereum costs gas, and gas prices have been way too high. Sending a few bucks could cost more in fees than the amount sent! Dencun aims to slash gas costs by around 75%.
How so?
Proto-danksharding (EIP-4844) introduces a new way for rollups to submit transaction data to the Ethereum blockchain in a more efficient manner. Currently, rollups must submit this data directly in transaction CALLDATA which is processed by every node and remains on-chain forever. This is an expensive approach that limits how cheap rollups can make transactions.
Proto-danksharding allows rollups to instead submit transaction data in "blobs" that are attached to blocks but not accessible to the EVM. This data has a time limit of around 18 days before being automatically deleted. By removing data from CALLDATA and allowing it to expire, rollups can make transactions much cheaper for users.
A key part of proto-danksharding is how the validity of blob data is verified. Rollups submit a "commitment" to the data by fitting a polynomial function that can be evaluated at secret points. A prover then fits the same polynomial to the real data and evaluates it at the same points, proving the commitment is valid. This commitment scheme is based on the KZG protocol.
The Ethereum community conducted the "KZG ceremony" where over 140,000 participants collectively generated the secret evaluation points in a decentralized way, ensuring no single party controls them. This ceremony was a major milestone and the largest of its kind ever performed.
I am proud to say I took part in this ceremony.
POAP #6863569
The address which minted this POAP participated in the KZG Summoning Ceremony: a publicly coordinated ritual to produce a random output. This output will be used in Proto-Danksharding, aka EIP 4844: an Ethereum scaling mechanism which will hopefully enable lower Layer 2 fees and greater global accessibility.
While proto-danksharding is an important step, the full "danksharding" vision aims to scale Ethereum to hundreds of thousands of TPS by allowing 64 blob attachments per block rather than just one. However, several protocol upgrades would be required first such as proposer-builder separation and data availability sampling to support very lightweight clients.
Potential bottlenecks of proto-danksharding include block space limitations if many rollups submit large blobs simultaneously. Future work includes expanding blob capacity and developing SNARKs STARKs to further reduce on-chain costs.
In summary, while proto-danksharding is just an initial step, it has the potential to significantly boost Ethereum scalability by enabling cheaper rollup transactions. However, careful testing and ongoing research is still needed to realize the full vision of danksharding and support massive on-chain activity.
In conclusion,
What's the benefit? Cheaper gas and scalability. High fees mean people avoid using Ethereum. But when transacting is affordable, people will transact more. More activity supercharges Ethereum's role as the web's financial backbone.
The gas reduction also turbocharges dApps like DeFi lending/borrowing platforms. Yield farmers rejoice! No longer will yield from lending a few ETH be eaten up in fees. Greater usability and lower barriers to entry strengthen Ethereum's Defi dominance.
I hope this essay provided useful insights into the complex issues at play. To continue the discussion, please share this analysis with others in the crypto community. Please also consider subscribing to receive future examinations of trends in blockchain technology and digital currencies.
