What is Dencun, the new Ethereum update?

Dencun is a major update to Ethereum, one of the leading proof-of-stake blockchains, and incorporates a new feature called “Proto-Danksharding.”. This update aims to lower transaction costs for Layer2 blockchains and address scalability.

This update was activated on the Sepolia testnet in late January 2024, following its activation on the Goerli testnet. It is part of Ethereum's broader strategy to improve scalability and reduce transaction costs for its users. It is expected to finally be deployed on March 13th 2024. That is if all the tests that have been conducted so far do not show any problems and ensure that the activation will be done without setbacks.

Dencun Technical Innovations

This new update will feature a series of innovations aimed at improving network scalability, security and efficiency. Below are the different innovations within this update:

Proto-Danksharding (EIP-4844)

This innovation involves partitioning the Ethereum blockchain into smaller sections or “shards” using the Proto-Danksharding technique. This enables parallel processing of transactions and smart contracts, significantly increasing network capacity and reducing transaction fees.

The implementation of Proto-Danksharding aims to address Ethereum's scalability challenges, which could result in a significant reduction in transaction costs for Ethereum's Layer2 solutions, directly benefiting the overall L2 ecosystem.

Improved security mechanisms

Another important point is the update and inclusion of new security mechanisms that will be integrated into the consensus layer (Deneb). These changes focus on strengthening network security and perfecting Ethereum's Proof-of-Stake (PoS) consensus algorithm.

Gas efficiency optimization

Ethereum has been constantly updating its gas policies in order to reduce the cost of fees within the network. In this sense, changes such as EIP-1559 (modification of the rate market), was one of those attempts that gave unclear results. Now with Dencun, EIP-2929 (increase in the cost of state access gas) and EIP-2537 (BLS curve operations) will be included. Both changes aim to improve gas efficiency, reduce transaction costs and improve the overall user experience on the network.

Basis for future developments

This new update also builds the foundation for further improvements, paving the way for Ethereum's full transition to a PoS consensus mechanism and further innovations in decentralized applications (dApps) and smart contracts.

This base for future developments is crucial to the continued development of Ethereum and its ability to adapt to the changing demands of the cryptocurrency and blockchain market.

Proto-Danksharding: the most anticipated feature

Proto-Danksharding, which will be activated in the new Ethereum Dencun update, is the most important technical innovation within this new update. It seeks to improve the scalability and efficiency of the network. Recall that Proto-Danksharding involves partitioning the Ethereum blockchain into smaller sections, known as "blobs", using the proto-danksharding technique. This enables parallel processing of transactions and smart contracts, significantly increasing network capacity and reducing transaction fees.

Among its main functionalities and benefits are:

Key features

• Blob storage. The implementation of Proto-Danksharding involves the integration of blob storage into the Ethereum blockspace. This allows you to optimize data availability costs and improve the scalability of Layer2 solutions.
• Efficient data processing. Blobs are a way to store and transmit large volumes of data in a highly gas-efficient manner, without needing to permanently write all this data directly to the Ethereum blockchain as normal transactions.
• Blob references. When blob-enabled contracts are called, input data is processed and stored securely on blob storage chains that run in parallel with the main Ethereum chain. Only small 16-byte references to this blob data, called Content Identifiers (CIDs), are permanently written to the main chain.

Benefits

• Cost reduction and performance increase. The introduction of Proto-Danksharding is expected to significantly reduce transaction fees in Layer2 solutions and increase processing capacity. This makes L2 solutions more competitive, attracting high-quality projects with lower costs and improved performance.
• Preparation for future improvements. Additionally, Proto-Danksharding lays the foundation for future implementations, including full Danksharding, separation of proposers and block builders, and data availability sampling.

With all this, it is intended that, once fully implemented, proto-dankshading will help Ethereum handle more than 100.000 transactions per second. This improvement is crucial to Ethereum's ability to support a growing ecosystem of decentralized applications (dApps) and users.

In conclusion, the implementation of the Dencun upgrade on the Ethereum mainnet will mark an important milestone in the platform's quest for scalability and efficiency. This update, along with upcoming development milestones, underscores Ethereum's commitment to innovation and meeting the growing demands of its user base.