Tech
Ethereum Finalizes “Dencun” Upgrade, in Historic Move to Reduce Data Fees
Ethereum, the second largest blockchain after Bitcoin, has activated its long-awaited “Dencun” update, a move to spur the growth of so-called level 2 networks like Arbitrum and Polygon, reducing data rates.
THE Dencún updatetechnically a hard fork in blockchain terminology, it was activated in the Ethereum era 269,568 at 1:55 PM UTC (9:55 AM ET) and finalized at 2:10 PM UTC.
The price of ether (ETH), the native cryptocurrency of the Ethereum blockchain, remained little changed following the update. Over the past 24 hours, the price of ETH fell by 0.5% to $3,968. The cryptocurrency has rallied around 50% over the past month, in sync with the benchmark’s 49% rise over the same time period CoinDesk 20 Index of the largest digital assets.
A key element of the update is enabling a new place to store data on the blockchain – called “blobs”, with a dedicated space separate from regular transactions and at a lower cost.
The upgrade, billed as Ethereum’s biggest in nearly a year, was seen as a pivotal moment in the blockchain’s history, ushering in a new era to address Ethereum’s notoriously high transaction fees, and could spark a rush among the most large layer-2 networks to take advantage of changes in blockchain scaling.
In the official watch holiday hosted by EthStaker and the Ethereum Foundation, Offchain Labs lead developer Terence Tsao noted that some of the larger rollups are delaying sending blobs of data to Ethereum until the network is more stable. Arbitrum Foundation account X noted that it will begin using blobs in the next 24 hours.
However, at least one victim has been reported: the layer-2 network said Blast in a posted on X that it had “stopped producing blocks due to issues related to Ethereum’s Dencun update.” Shortly thereafter, Blast tweeted that “the problem has been solved,” and that a full analysis will be shared “soon.”
Central a the update is the implementation of “proto-danksharding” – a new category of transactions that will store data on Ethereum, through the introduction of data blobs.
The main benefit of this update will not be for Ethereum users themselves, but primarily for layer 2 networks like Arbitrum, Optimism, and Polygon, which help scale Ethereum by batching user transactions and then returning them to the main blockchain, where in large batches.
This type of technology is known as rollup e rollup networks have skyrocketed in the Ethereum ecosystem in recent years. Users have deposited billions of dollars into these types of chains and have recently seen higher transaction volumes than the basic chain.
Once Dencun is implemented, these layer 2s will be able to publish data to Ethereum, rather than into the clunky transactional data fields where they are currently publishing it. The new setup should make settlement data for rollups more efficient and cost-effective, which should then trickle down to end users while also reducing their fees.
Dencun is the first step towards blockchain his research to implement “sharding,” which is a technological feature that will break the blockchain into mini-shards (or mini-chains), to process more transactions at low cost. Full implementation of sharding is still years away, so Dencun’s implementation of proto-danksharding is an interim solution to Ethereum’s high gas fees.
Proto-danksharding is also supposed to foster a new class of blockchain that has entered the Ethereum ecosystem known as data availability (DA) levels.. DA layers like Celestia, EigenDA, and Avail help networks store large amounts of data for rollups
DAs are separate blockchains that handle the task of proving that data from these transactions exists and is available if needed. Since rollups produce a lot of data – and consume a lot of data space on Ethereum – the need for DA solutions has become even more crucial. Proto-danksharding could therefore make DA data download costs cheaper.
As Layer 2 fees are set to drop dramatically across Ethereum rollups, there is speculation that this could spark a fee war between many of these ancillary networks, who will compete for the same users by offering cheaper transaction fees.
How exactly everything will go the play out is still ambiguousas the full effect of proto-danksharding can be adequately measured once implemented.
In a recent interview with CoinDeskJesse Pollak, creator of Base, the layer-2 network of American cryptocurrency exchange Coinbase, said that without an increase in usage, costs could drop by 90% to 95%.
Each ecosystem will eventually decide how to price these transaction fees, said Steven Goldfeder, co-founder of Offchain Labs, the lead developer behind the Arbitrum network, Ethereum’s largest layer 2, based on the crucial metric of total value blockedor TVL – similar to deposits.
“Some of our competitors set Tier 2 rates at essentially zero,” Goldfeder said. “This is not sustainable.”
Other Level 2 experts say Dencun will require greater collaboration between rollup projects.
“Scalability is the fundamental unlock that enables permissionless collaboration between project developers and teams,” Karl Floersch, CEO of OP Labs, the development company behind the Optimism blockchain, told CoinDesk. “With EIP-4844 and Dencun, developers in the Ethereum ecosystem can build together more easily. The upgrade will allow a loosely coordinated group of developers to actually build systems that provide overall experiences that rival the user experiences we are accustomed to from top-down, centrally planned platforms.”
While proto-danksharding is the focus of the Dencun update, there are eight other Ethereum improvement proposals (EIPs) that have been rolled into the Dencun package that will primarily interest developers:
UPDATE (2.28pm): Updates to indicate that the Dencun update is finalized and adds that some major rollup teams may be waiting to start pushing blobs.