As Ethereum’s Dencun upgrade nears, here is all you need to know

Discover how Ethereum’s Dencun upgrade could enhance security and reduce transaction fees.

The Ethereum (ETH) network is set to receive a major update named “Dencun,” a blend of two smaller upgrades, Cancun and Deneb. The upgrade is expected to significantly reduce layer 2 (L2) transaction fees and enhance Ethereum’s scalability, efficiency, and security.

The Ethereum upgrade date is scheduled for March 13, with a Feb. 27 entry on the Ethereum Foundation Blog announcing that it has been successfully activated on all test networks, including Goerli, Sepolia, and Holešky.

So, what is the Ethereum Dencun upgrade? Read on to find out why it is causing so much excitement among the Ethereum community.

Ethereum’s journey and its next big step

In December 2020, Ethereum introduced the Beacon Chain, which brought in the proof-of-stake (PoS) consensus mechanism and allowed for ETH to be staked—this was essential for moving Ethereum away from the older proof-of-work (PoW) consensus method.

By September 2022, Ethereum had made a big move called “The Merge,” linking its main network with the Beacon Chain and switching completely to proof-of-stake. In April 2023, the Shanghai upgrade allowed users to withdraw staked ETH, making it easier for validators (people who help verify transactions) to manage their stakes.

On Sept. 28, 2023, Ethereum launched a new testing network called Holešky, which supports 1.4 million validators and is a foundational step for the ETH Dencun upgrade.

Many have asked what is the main goal of Ethereum’s Dencun upgrade. Looking back, the earlier Ethereum network upgrades were more about laying the groundwork for a more sustainable and secure Ethereum rather than directly tackling the issue of scalability.

The Merge was about moving to a greener and more efficient system of verifying transactions, and the Shanghai upgrade improved how people can stake their ETH. The ETH Dencun update, a fusion of two pivotal enhancements, is seen by many as the culmination of the journey started by previous upgrades to turn Ethereum into a faster, more secure, and more scalable network.

The first part of the upgrade, Cancun, focuses on the “execution layer”—how transactions are processed and managed. The second part, Deneb, tackles improvements in the “consensus layer,” which is all about how network participants agree on the state of the blockchain.

Enhancements for a better Ethereum

The Dencun upgrade brings several technical improvements to solidify Ethereum’s infrastructure. For instance, it introduces techniques for more streamlined data management and smarter contract security, along with tweaks that promise to make Ethereum run smoothly and cost-effectively for its users.

It also aims to improve the experience for those who stake ETH, making it easier and more beneficial for users to participate in the network’s security.

Proto-danksharding

Among Dencun’s spotlight features is proto-danksharding, which was introduced through a specific Ethereum Improvement Proposal (EIP) known as EIP-4844. In simpler terms, this feature is about making Ethereum more scalable by efficiently managing large chunks of data.

It employs a method that temporarily holds transaction data, making the process smoother and cheaper.

Traditionally, all transaction data is kept on the blockchain permanently. However, this new approach introduces a way to include large chunks of data (blobs) in transactions without storing them forever.

Its proponents claim it will make processing transactions faster and cheaper, especially for rollups. Rollups bunch several transactions into one, reducing the workload and cost (gas) of recording them on the Ethereum network.

While rollups are already a step forward in managing transactions more efficiently, they still leave room for improvement. Until now, the data collected by rollups had to be stored permanently on the blockchain, taking up space and potentially slowing things down.

Proto-danksharding proposes a way for this data to be temporarily stored and removed after a specific time. It is done by creating a summary (or commitment) of the data, which ensures that even after the detailed data is deleted, the integrity of the transactions is not compromised.

What’s more, this approach means that only temporary storage of data is necessary, significantly reducing the clutter and maintaining the speed and efficiency of the Ethereum network. This temporary storage could last a few months before the data is deleted to prevent an overload of unnecessary information.

Improved security and performance

The most recent update to Ethereum introduces several EIPs aimed at making the network more secure and efficient.

A standout feature is EIP-4788, which enhances how information travels within Ethereum, particularly improving the connection between its execution and consensus layers. In the past, these layers worked together as separate entities, ensuring that for every block of data in one layer, there was a corresponding block in the other.

However, getting these layers to talk to each other could be quite complicated, sometimes even needing extra help from external services.

With the new upgrade, this process gets simpler by incorporating a summary from the consensus layer directly into the execution layer’s current block of data. This summary acts like a bridge, allowing direct access to the consensus layer’s information without needing a middleman, making the system more trustworthy.

Furthermore, this update supports Ethereum’s apps by keeping a log of these summaries in a smart contract, making it easier to check on the consensus layer’s status.

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Improved staking

Dencun is also on a mission to improve the staking experience on Ethereum.

Proposals like EIP-7044 and EIP-7045 aim to streamline the process of exiting and making attestations, making it more user-friendly. Here’s a simple breakdown:

EIP-7044 is expected to simplify earning rewards from Ethereum for those who prefer not to be full validators. Since Ethereum transitioned to a Proof of Stake (PoS) model, individuals can earn rewards by staking 32 ETH. However, those who are not interested in managing the technical aspects of being a validator can opt for delegated staking. With delegated staking, they stake their ETH through a third party while retaining control over their assets. Previously, stopping staking with a specific validator required a pre-signed exit message, which relied on trust. EIP-7044 aims to make these exit messages permanent, providing more security and peace of mind.

Meanwhile, EIP-7045 seeks to improve the Ethereum network’s efficiency and competitiveness. For a block to be considered official, it needs validations or attestations from validators. Currently, validators have a limited time window to submit these attestations. However, EIP-7045 proposes to extend this period significantly. This change would allow more validators to earn rewards and, importantly, speed up the confirmation of blocks on the blockchain.

Enhanced cost efficiency

The forthcoming update will also introduce significant cost-efficiency improvements, particularly those highlighted by innovations such as EIP-5656 and EIP-1153.

These changes focus on streamlining smart contract functionality and enhancing temporary storage techniques. Specifically, EIP-5656 introduces an operation code, or opcode, called MCOPY, aimed at boosting the efficiency of memory copying within the Ethereum Virtual Machine (EVM).

This opcode simplifies the process by replacing the previously cumbersome method involving MSTORE and MLOAD opcodes, offering a more streamlined and effective approach.

Further addressing efficiency, EIP-6780 targets the controversial SELFDESTRUCT opcode. While widely used in numerous smart contracts, its problematic nature has caught the community’s attention.

Through EIP-6780, the goal isn’t to remove SELFDESTRUCT entirely—which would impact existing contracts—but to render it obsolete for future applications, effectively sidelining it without direct elimination.

These improvements are all about making Ethereum staking more flexible, secure, and efficient for everyone involved.

Simplifying Ethereum’s growth

Another proposal in the next Ethereum upgrade is EIP-7514, and it’s all about managing how many new validators can join Ethereum at once. Too many validators joining too fast could cause problems, like making some tasks harder or leading to too much control being in the hands of a few big players.

EIP-7514 plans to limit how many new validators can start in each epoch (a set period in the Ethereum network) to 8. This change aims to make the growth of validators more steady instead of jumping up fast. It’s like inviting only a certain number of people to a party to make sure it doesn’t get too crowded.

Another important part of this proposal is that it treats joining and leaving differently. More specifically, the limit only applies to new validators joining, not those wanting to leave.

While it might seem like a small tweak, it’s an important step to keep Ethereum running smoothly and ensure it’s ready for future changes and growth. By doing this, Ethereum hopes to maintain its security and decentralization, ensuring no single group has too much power and keeping the network accessible and fair for all users.

A cautious yet optimistic outlook

While the Dencun upgrade offers promising prospects for enhancing Ethereum, developers are proceeding with caution. Introducing new consensus mechanisms and architectural changes could bring unforeseen complexities and operational hurdles.

Additionally, network upgrades inherently involve uncertainty, as unexpected technical issues may temporarily affect user experience and network stability. Concerns include potential challenges related to storage capacity and data management with the introduction of larger data blocks.

To fully embrace this transformative upgrade, stakeholders must exercise prudence and conduct thorough due diligence.

Nevertheless, the anticipation surrounding the next Ethereum upgrade underscores a strong belief in its benefits, reaffirming the network’s commitment to continuous improvement.

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