Dencun upgrade is here: Can Ethereum really become 100 times cheaper?

Ethereum ushered in the highly anticipated Dencun upgrade (also known as the Cancun-Deneb upgrade) in March 2024. This update promises to reduce gas fees, improve transaction speed, and enhance network stability. But can these promises be fulfilled? What does it mean for your wallet?

Key Highlights: What Are Proto-Danksharding and EIP-4844?

The soul of Dencun’s upgrade isProposal EIP-4844, which introduces a key innovation -Proto-Danksharding(Prototype data sharding).

In simple terms, this technology introduces the concept of “blobs” (data blocks). Previously, Ethereum was less efficient in handling data. Now, Proto-Danksharding allows the network to temporarily store and process large numbers of data blocks without having to keep them permanently on the blockchain. It’s like putting a “temporary hard drive” on Ethereum.

Why is this important? For Layer-2 networks (e.g., Arbitrum, Optimism, Polygon), data availability costs account for the majority of operational costs. Proto-Danksharding directly reduces these costs – theoretically by 10-100 times.

Other technical improvements for Dencun upgrades

In addition to EIP-4844, the upgrade includes additional optimizations:

• EIP-1153: Introduce temporary storage opcodes for smart contract execution to further reduce gas consumption
• EIP-4788: Improved the consensus layer and introduced the Beacon Block Root to allow Layer-2 to access consensus data more directly
• EIP-5656: Added the MCOPY opcode to optimize the efficiency of memory data copying
• EIP-6493: Fine-tune the mechanism for validators to select blocks and improve chain finality
• EIP-6780: Limit the SELFDESTRUCT function to enhance network security

Upgrade Timeline: A Fact What

• January 17, 2024:Goerli testnet activation
• January 30, 2024: Sepolia testnet activation
• February 7, 2024: Holesky testnet activated
• March 13, 2024: The mainnet is officially deployed

The test lasted for 2 months, and the development team fully verified the stability of the upgrade.

Are gas fees really cheap? Comparison of actual data

According to the measured data before the upgrade:

• Transfer ETH on Arbitrum: $0.24
• Transfer ETH on Optimism: $0.47
• ETH on Polygon: $0.78
• Token swap cost: $0.67-$2.85 (different chains)

Expectations after the upgrade: If Proto-Danksharding achieves a 10-100x reduction in data costs, these fees are expected to drop to the $0.01-$0.05 level. For frequent traders, this is a qualitative leap.

However, it should be noted that the actual decline depends on factors such as whether dApp developers adopt new features and user usage.

Specific impact on the Layer-2 ecosystem

Layer 2 networks are key to Ethereum’s scaling. The Dencun upgrade is a game-changer:

Compatibility and interoperability improvements

Interaction between Layer-2 and the mainnet has become cheaper and faster. The cost of cross-chain transfers has been significantly reduced, and users can have more flexibility in liquidating funds across different chains.

Throughput soared

The theoretical throughput of the Ethereum mainnet is expected to increase from about 15 TPS (transactions per second) to 1000 TPS. While this is primarily achieved through Layer-2, its ability to accommodate the entire ecosystem is revolutionary.

Unified safety standards

New security practices and standards will be promoted on Layer-2 to create a more stable trading environment. A stable network means less congestion, which in turn automatically lowers gas fees.

What do regular users and developers get?

Impact on traders

• The cost has plummeted: Fee costs may be reduced by 50-90% for frequent traders
• Faster confirmation: Increased transaction speed and shorter market reaction time
• More options:d App ecosystem is expanding due to declining costs, and new applications are emerging

Opportunities for developers

• Data storage expansion:D encun’s blobs introduce a fixed data throughput of 1 MB/slot, allowing developers to build data-intensive applications
• New application scenarios: Improvements in cost and speed have opened up new business models – such as real-time data streaming, on-chain gaming, high-frequency DeFi strategies
• Ecological prosperity: More developers have invested in Layer-2 development, and the entire Ethereum ecosystem has ushered in vitality

Benefits for stakers

The appeal of liquid staking ETH is further enhanced. After the upgrade, the network is more efficient and secure, and the expected returns of staking rewards are more stable. This is a major benefit for users who want to participate in staking but need to maintain liquidity.

Risks of Escalation: Challenges Not to Be Ignored

Technical risks

Large-scale system upgrades always come with technical risks. Possible vulnerabilities or implementation errors can lead to network instability or security risks.

Compatibility issues

Existing smart contracts and dApps need to adapt to new mechanisms. Temporary failures or security risks may occur during migration. Developers and users need to closely monitor official announcements.

Temporary fluctuations in gas fees

In the early stages of the upgrade, gas fees may fluctuate as the network adapts to the new mechanism. The true fee drop depends on:

• Developer adoption velocity
• Migration speed for users
• Overall usage of the market

Ethereum Roadmap: What’s After Dencun?

Dencun is not the end, but a key step in Ethereum 2.0.

Milestones achieved

• December 2020: Beacon Chain was launched, introducing PoS consensus
• September 2022: The Merge, Ethereum officially switches from PoW to PoS (energy consumption decreases by 99.5%)
• April 2023: Shanghai/Capella upgrade, enabling withdrawal function to incentivize more staking

Upcoming upgrades

**Electra + Prague (codename Petra)**will be the next stage. The most striking of them are:Verkle TreesThe introduction of a new data structure that further optimizes data storage and paves the way for full danksharding.

Long-term goal: Full Danksharding

Proto-Danksharding is a transitional scheme. FinalFull DankshardingEthereum will be sharded into multiple independent data shards, each capable of processing transactions and smart contracts independently. This will push Ethereum’s throughput to thousands or even tens of thousands of TPS.

Conclusion: The Real Meaning of Dencun Upgrades

The Dencun upgrade represents the maturity of Ethereum engineering – it is not a radical reform, but a robust, gradual optimization.

For traders: The drop in gas fees is real, especially on Layer-2. This opens up new trading strategy possibilities.

To developers: New technology spaces mean new opportunities for innovation. A lower-cost, faster network incentivizes more creative applications.

For investors: The upgrade enhances Ethereum’s competitiveness but does not immediately drive up the price of ETH. The real value comes from the prosperity of the ecosystem and the growth of usage.

For regular users: If you use DeFi or trade on Layer-2, the feeling is most straightforward - lower fees mean more funds are invested rather than fees.

Since Dencun’s activation in March 2024, Ethereum is delivering on its scaling promises. In the future, with the advancement of Verkle Trees and Full Danksharding, Ethereum will gradually become a truly global computing platform. Now is a great time to witness the Ethereum upgrade journey.