Author: Noah Citron, Valeria Nikolaenko, a16z crypto
Translation: Kate, Mars Finance
Last week, Ethereum underwent its largest upgrade since The Merge. “Dencun” is a portmanteau of “Deneb” and “Cancun”, following the tradition of naming upgrades after stars and cities – “Dencun” bundles nine proposed network changes together.
Among these proposed changes, also known as Ethereum Improvement Proposals (EIPs), the most anticipated is EIP-4844 – considered a significant milestone on the scalability roadmap. EIP-4844 is also referred to as “protodanksharding” (inspired by developer Diederik Loerakker, aka protoolambda, and Dankrad Feist).
Why is it important?
So why is EIP-4844 important? Firstly, it introduces the concept of “blobs” – a place on an Ethereum block to store additional temporary data. Simply put, a blob is a new location for storing rollup data added to the network. Rollup is a Layer 2 (L2) service that processes off-chain transactions and brings them back on-chain, reducing network load. Since rollup only temporarily needs this data, most of the blob data will be forgotten by the blockchain later.
Furthermore, since blobs are temporary – like Instagram Stories (although designed to expire after 18 days in this case) – they reduce Ethereum’s reliance on permanent data storage. This is also facilitated by data availability sampling, allowing Ethereum to store more blob data.
Here is a helpful analogy from a16z crypto engineer Noah Citron that can help summarize why all of this is important:
Imagine Ethereum as a highway.
Mainnet transactions are people driving alone.
Rollup is the public bus that gathers people together, helping to alleviate traffic congestion.
EIP-4844 essentially adds a “bus lane” to Ethereum, making the network more efficient.
The Dencun upgrade also paves the way for adding more “bus lanes” in the future.
Benefits and Results
Imagine if rollup data never expired. This would increase blockchain data by approximately 83.7 GB per month (about 31 days) and 985.5 GB per year. This number will only continue to increase because remember: the blockchain stores information permanently. By regularly expiring, blobs limit the demand for excessive data storage – especially when other data can be stored off-chain through rollup. (To get a more concrete idea of the data size of blobs: the target is 3 blobs per Ethereum block, with a maximum of 6 blobs per block. Each blob is ~128 KB of data – a vector containing 4096 elements, each about 32 bytes.)
EIP-4844 has significantly reduced costs. For example, a transaction on rollup provider Optimism now costs less than 0.1 cents (source: l2fees.info) – about 1000 times cheaper than before the upgrade. Please note that these immediate cost savings are unlikely to last: as more people put more transactions into rollup, costs may increase due to induced demand. (If you are interested in tracking blob fee markets, check out the Dune dashboard created by Citron: the dashboard shows the current base fee for blobs and the current target base fee percentage in use.)
Some believe that the Dencun upgrade could reduce costs by 10-1000 times (this is purely an estimate). However, a future upgrade called PeerDAS or “full danksharding” aims to make rollup more efficient, increasing transaction throughput by 32 times. The key innovation is to add more shards to increase efficiency without too much additional cost. Therefore, full sharding technology will allow many more “bus lanes” to be added at the price of one bus lane, potentially bringing significant throughput growth in the future.
Impact and Applications
Lower transaction costs are important for everyone, as cheaper transactions can unlock entirely new categories of applications that would not be feasible at higher fees.
Since Dencun also adds the concept of transient storage (EIP-1153) to the Ethereum Virtual Machine (EVM), smart contracts can now store data bits during transactions, rather than permanently or only during the execution of specific contract calls. This means developers can do cooler things than before, and at a much lower cost, as they now have a “mid-term” memory for smart contracts. By extension, think about the impact of different types of volatile storage on semiconductor innovation…
The Dencun upgrade also brings other benefits to developers, including more liquidity staking protocol tools, to understand what’s happening on the beacon chain (from the EVM), helping to decentralize these protocols. There is also an mcopy opcode that, along with Dencun, now makes some memory-involved smart contracts more energy-efficient.
In conclusion:
While the long-awaited “Merge” is one of the biggest technical feats to date – transitioning Ethereum from more energy-intensive proof-of-work to proof-of-stake – we are now entering the “Surge”, with ongoing updates that can further expand Ethereum. Like all other updates, this one has been a long time coming (Ethereum held a trusted setup ceremony for it).
But most importantly, all of these upgrades are the result of countless developers worldwide coordinating and contributing through open source.