Ethereum’s Dencun upgrade is coming near. It’s scheduled for 13th March 2024. It should improve some of its main issues. These are scalability and cheaper transaction fees. It’s part of a bigger upgrade, named ‘The Surge’. This is a follow-up to the recent ‘The Merge’ update. This saw the change from PoW to PoS.
So, what is Ethereum’s Dencun upgrade all about? Let’s take a closer look.
What Is Ethereum’s Dencun Upgrade?
As mentioned, Ethereum’s Dencun upgrade is a small part of a bigger roadmap. It’s part of ‘The Surge’. So, let’s first take a look at the roadmap that Vitalik Buterin proposed for Ethereum.
- The Merge — This already took place, and it made the change from PoW to PoS possible.
- The Surge — It upgrades rollups to scalability and introduces data sharding.
- The Scourge — This upgrades censorship resistance, decentralization, and MEV-related protocol risks.
- The Verge — This will make verifying blocks easier.
- The Purge — It reduces the computational costs of running nodes. This also includes simplifying the protocol.
- The Splurge — A bag of other upgrades that aren’t covered by the previous categories.
So, plenty of upgrades are still in the pipeline. See the picture below.
Source: X
However, let’s go back to Ethereum’s Dencun upgrade. This is a hard fork. In other words, there will be a new chain, that splits from the old chain. This new chain will have all the upgrades. This should take place on 13th March. However, Ethereum is notorious for delaying upgrades. Nonetheless, do expect this major upgrade somewhere in mid to late March.
Ethereum’s Dencun Upgrade EIPs
Ethereum’s Dencun upgrade includes a series of EIPs. These are Ethereum Improvement Proposals. In particular,
- EIP-4844 — This Increases scalability.
- EIP-1153 — This proposal lowers on-chain data storage costs.
- EIP-4788 — Enhances security and functionality.
- EIP-5656 — Improves EVM performance.
- EIP-6780 — This enhances network security.
Sharding
So, of all these EIPs, EIP 4844 is the most important one. It introduces Proto-Danksharding. Sharding improves scalability. You can compare this with a busy shop where only one cashier is available. As a result, there’s a queue. However, once the shop opens up more cashiers, the queue disappears. The picture below shows how EIP 4844 works.
Source: Solidity 101 blog
At first, Ethereum wanted to introduce ‘shard chains’. However, L2s already took care of plenty of scalability. Instead, we now have Proto-Danksharding. This introduces and adds ‘data blobs’ to Ethereum blocks. They are also known as blob-carrying transactions. These result in making the L2 transaction costs very cheap. That’s because they create more block space in L2s. They are like any other transaction. However, they carry an extra piece of data.
At the same time, they increase Ethereum’s transaction throughput. As a result, it benefits the complete L2 ecosystem on Ethereum. They become much more attractive to both devs and users. In turn, this should result in L2s becoming a much more viable option over L1s. So, in a nutshell, this benefits the whole Ethereum ecosystem. For example, DeFi and gaming may see a boost. See the cost comparison table below.
Source: IntoTheBlock
Which L2s Are Going to Benefit Most?
The entire Ethereum L2 ecosystem will benefit from this upgrade. However, some are worth pointing out. They already have existing features that will fit right into this upgrade.
Polygon ($MATIC)
Polygon is about to start its upgrade. This includes the $MATIC to $POL transition. Polygon also heavily invested in ZK technology. As a result, Dencun could be a serious catalyst for Polygon. This puts them in a strong position over the next couple of weeks or months.
Arbitrum ($ARB)
Most of the new Dapps are launching on Arbitrum. They are also one of the top L2s when measured by TVL. The chain has a vast ecosystem that may get a boost from Dencun.
Optimism ($OP)
Optimism mingles in the top 3 by TVL for L2s. Measured by marketcap, it’s also positioned very well. Like Arbitrum, it already offered cheap transactions. They will become even cheaper. A recent announcement of their fourth airdrop saw interest rise for this L2.
COTI Network ($COTI)
COTI just announced their V2. This is privacy based and introduced ‘Garbled Circuits’. These are efficient in preserving privacy.
We've achieved a breakthrough in blockchain encryption to be used on the blockchain for the very first time! 🌐
This innovation promises to revolutionize privacy and security in the blockchain space.Dive into this 🧵to learn more
[1/8] pic.twitter.com/CwbKOEeZ1x— COTI Foundation (@COTInetwork) February 20, 2024
Mantle ($MNT)
Mantle is currently one of the fastest-growing L2s. It’s now in third spot, after Lido and RocketPool for LSDs (liquid Staking Derivatives). METH stakes can also expect some airdrops.
Metis ($METIS)
Metis has set 4.6 million $METIS tokens for grants. At the current $METIS price of $105, that’s almost $500 million. In March, it will launch a decentralized sequencer, Alpha Mainnet. Furthermore, there will be an LSB (Liquid Staking Blitz) campaign.
$METIS is potentially an undervalued play leading up to Dencun. Upcoming catalysts:
– Dencun Upgrade on 13th March
– Decentralized sequencer alpha mainnet launch mid March, external nodes early-mid april. Community Testing is over, but users will now be able to keep earning… pic.twitter.com/3sgIpcQfk4— Sandra (@sandraaleow) February 21, 2024
Conclusion
Ethereum’s Dencun upgrade will bring much-needed scalability to Ethereum. This upgrade is part of the ‘The Surge’ upgrade. Ethereum’s L2s already managed to scale Ethereum quite well. As a result, we should also see lower transaction costs on L2s. This upgrade should benefit all of Ethereum’s L2 ecosystem.
This article was inspired by this X thread.
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