Ethereum Dencun Upgrade After Two Years: How Have Transactions and Scalability Changed?

Ethereum continues to lead in the fields of decentralized applications and smart contracts. The Ethereum Cancun-Deneb (Dencun) upgrade, highly anticipated at the start of 2024, was successfully implemented in March, marking a significant milestone in the crypto ecosystem. By introducing Proto-Danksharding technology centered around EIP-4844, the Dencun upgrade fundamentally transformed the network’s scalability and efficiency. So, what are the real impacts of the Dencun upgrade, and how much of the community’s expectations have been met? This article examines the results of Ethereum’s strategic upgrade over the past two years and its actual effects on the ecosystem.

What Is the Ethereum Dencun Upgrade and How Did It Happen?

The Ethereum Dencun (Cancun-Deneb) upgrade is a key component of Ethereum 2.0’s roadmap. Inspired by the bright Deneb star in the Cygnus constellation, this upgrade is a critical part of Ethereum’s comprehensive strategy to enhance scalability, security, and overall efficiency.

The Dencun upgrade was implemented in two layers: Cancun on the Data Availability Layer, and Deneb on the Consensus Layer of the Ethereum blockchain. After testing in testnets starting in January 2024, the upgrade was successfully deployed on the mainnet on March 13, 2024. As planned, testing began with Goerli on January 17, followed by Sepolia on January 30, and Holesky on February 7.

EIP-4844 and Proto-Danksharding: The Technical Core of Dencun

Proto-Danksharding, also known as EIP-4844, forms the core of the Dencun upgrade. This technology aims to significantly improve data accessibility and storage efficiency on the Ethereum network. The upgrade introduced the concept of large data packets, called “blobs,” which expand the network’s data storage and processing capacity.

Proto-Danksharding serves as a crucial intermediate step before full Danksharding implementation, greatly increasing Ethereum’s scalability and transaction throughput. Additionally, the Dencun upgrade includes a “State Expiry” feature that optimizes blockchain performance by systematically removing outdated and unused data, simplifying the network and boosting overall efficiency.

The introduction of Proto-Danksharding had notable impacts on Data Availability (DA) layers such as Celestia, EigenDA, and Avail. These layers provide scalable infrastructure for data storage, especially for transaction data, supporting Ethereum and Layer-2 solutions. After its deployment, access to DA data and storage costs decreased, improving the economic efficiency of these networks.

Other Important EIPs Accompanying Dencun

The success of the Dencun upgrade was not only due to Proto-Danksharding but also to several accompanying technical improvements:

1. EIP-1153: Introduced temporary storage opcodes allowing smart contracts to use transient storage, reducing gas costs and increasing scalability.

2. EIP-4788: Added Beacon Block Root commits, enhancing the consensus layer by providing direct access to current consensus data, thus improving operational efficiency.

3. EIP-5656: Introduced the MCOPY opcode for more efficient copying of in-memory data during smart contract execution.

4. EIP-6493 (Fork Choice Rule): Improved the mechanism for validators to select which block to follow, increasing blockchain finality and reducing centralization risks.

5. EIP-6780: Restricted the use of SELFDESTRUCT in smart contracts, strengthening network security and stability.

Actual Effects of the Dencun Upgrade

Scalability and Transaction Volume Improvements

Following Dencun, Ethereum’s transaction processing capacity increased significantly. Before the upgrade, the network handled around 15 transactions per second (TPS); afterward, it managed higher volumes more efficiently. Layer-2 solutions benefited directly from Proto-Danksharding’s scalability improvements, enabling faster transactions.

Significant Drop in Gas Fees

One of the most anticipated effects was a reduction in gas fees. The primary goal of EIP-4844 was to cut Layer-2 gas costs by 10 to 100 times, and this was largely realized within two years. As of early 2024, average transaction costs were approximately $0.24 on Arbitrum, $0.47 on Optimism, and $0.78 on Polygon. Post-upgrade, these costs dropped noticeably, reducing user transaction expenses substantially.

Network Efficiency Enhancements

Ethereum’s performance profile improved after Dencun, with more sophisticated transaction processing and increased capacity reducing network congestion. These improvements facilitated the development of decentralized applications (dApps) and the deployment of more complex smart contracts.

Strengthening Security and Stability

Through EIP-6780 and other enhancements, Ethereum’s security was further reinforced. Advanced cryptographic techniques and improved network protocols made Ethereum more resilient against sophisticated cyber threats.

Impact of Dencun on Layer-2 Solutions

Layer-2 networks are designed to provide scalability solutions by processing transactions off the main Ethereum blockchain (Layer-1) and submitting them in batches. According to Fidelity reports, Layer-2 solutions accounted for about 10% of total Layer-1 fees.

Dencun’s effects on Layer-2 include:

Enhanced Interoperability: The upgrade made it easier for Layer-2 solutions to interact with the main chain, reducing costs and increasing efficiency in cross-layer transactions.

Increased Transaction Capacity: As the main chain became more efficient, Layer-2 solutions benefited from faster and cheaper transaction finality, leading to a noticeable decrease in related fees.

Standardization of Security Practices: Dencun introduced new security standards and practices for Layer-2 networks, creating more stable and reliable environments for transactions.

Effects of the Ethereum Dencun Upgrade on Users and Developers

The Dencun upgrade is a significant milestone in Ethereum’s roadmap, especially as a precursor to Danksharding, aiming to massively increase scalability. It has moved Ethereum toward being 100 to 1000 times more scalable.

Enhanced Transaction Capacity and Scalability: Post-upgrade, Ethereum’s processing capacity improved markedly. Users benefited from faster transactions and the network’s security was bolstered by its proof-of-stake system.

A More Robust dApp Ecosystem: The network’s ability to handle high transaction volumes and support diverse smart contracts fostered a more vibrant dApp ecosystem, enabling developers to build more complex applications.

New Opportunities for Developers: The upgrade introduced major improvements in transaction efficiency and compatibility, encouraging innovative applications. Notably, the expansion of storage via “blobs” with a fixed 1 MB per slot bandwidth opened new possibilities for data-intensive use cases.

Increased ETH Liquidity Staking Activity: Dencun revitalized ETH liquidity staking, allowing users to participate in staking while maintaining liquidity and earning rewards.

Dencun in the Ethereum 2.0 Roadmap

Ethereum 2.0 represents a transformative journey toward a more scalable, secure, and efficient Ethereum.

Phase 0: Beacon Chain launched on December 1, 2020, as a critical first step. Operating parallel to the mainnet, it introduced a Proof of Stake (PoS) blockchain that increased security and laid the groundwork for future upgrades.

The Merge on September 15, 2022, combined the Beacon Chain with the mainnet, transitioning Ethereum to PoS and reducing energy consumption by over 99.5%.

Ethereum Shanghai/Capella Upgrade completed in April 2023, enabled withdrawal of staked ETH and rewards, increasing network accessibility and encouraging staking participation.

Dencun and Proto-Danksharding built upon these milestones, with the successful deployment on March 13, 2024. Proto-Danksharding, in particular, marked a transformative step, further boosting scalability and efficiency.

Next Step: Ethereum Petra Upgrade after Dencun, the community is focusing on the upcoming Electra + Prague (Petra) upgrade, which is expected to introduce innovations like Verkle Trees, enhancing data storage efficiency.

From Proto-Danksharding to Full Danksharding: The Roadmap Continues

Proto-Danksharding was a transitional phase preparing the network for full Danksharding, which involves splitting the network into multiple shards, each capable of processing transactions and smart contracts independently. This strategic partitioning aims to alleviate congestion and reduce transaction fees further. Dencun was a crucial step toward this vision.

Potential Risks and Challenges of the Dencun Upgrade

While Dencun represents significant progress, it also carried certain risks:

Technical Complexities: The upgrade involved complex new mechanisms, which could introduce security vulnerabilities or instability. However, most of these risks were effectively managed over the two-year process.

Compatibility and Interoperability Issues: Transitioning to new systems can cause compatibility challenges with existing smart contracts and dApps. Careful management minimized these issues.

Temporary Gas Price Fluctuations: During the transition, adjustments to new mechanisms caused some volatility in gas prices, but long-term reductions were achieved.

Realizing Ethereum’s Scalability Vision

The Dencun upgrade was a pivotal moment in Ethereum’s evolution, marking a major step toward a more efficient and scalable network. The community’s excitement, especially around Proto-Danksharding, reflected the transformative potential of these developments.

The path toward full Danksharding underscores Ethereum’s ongoing commitment to innovation. With Dencun and future upgrades, Ethereum is steadily progressing toward a more scalable, efficient, and user-centric blockchain platform.

The crypto market experienced a parallel transformation with the Dencun upgrade, opening new opportunities for investors and traders to interact with and benefit from the Ethereum ecosystem.