Dencun: Revolutionary Ethereum upgrade in March 2024 and its impact on the crypto ecosystem

Ethereum Network, which pioneered the development of decentralized applications and smart contracts, is preparing for a major upgrade. This involves the Cancun-Deneb update, widely known as Dencun, which has become a key milestone in the implementation of Ethereum 2.0. At the heart of this upgrade is the introduction of Proto-Danksharding via EIP-4844 — a technology that promises to radically change the network’s scalability parameters. The crypto community is eagerly awaiting this event, as it could revolutionize gas fee economics and the throughput of decentralized applications.

Dencun Upgrade Structure: From Theory to Practice

The Ethereum Dencun update, also known as Cancun-Deneb, represents a critical component of the blockchain’s strategic development. Named after the Deneb star in the Cygnus constellation, it covers two key areas: the Cancun update focuses on data availability, while Deneb addresses the consensus layer. Together, these components create a synergy aimed at increasing throughput, security, and overall Ethereum performance.

EIP-4844 and the blobs concept: a data processing revolution

The central element of Dencun is EIP-4844, or Proto-Danksharding, which introduces a fundamentally new approach to data management in the network. Instead of traditional storage, the system now uses “blobs” — specialized containers for compactly storing large volumes of information. This innovation allows for a significant increase in network throughput without overloading resources.

Proto-Danksharding serves as a transitional step toward full Danksharding implementation and directly impacts emerging data availability layers (Data Availability), including projects like Celestia, EigenDA, and Avail. These solutions will be able to reduce operational costs, making them more attractive for Layer-2 solutions.

The update also includes a State Expiry feature, which automatically deletes outdated data, thereby optimizing network resource usage and increasing overall efficiency.

Additional Ecosystem Improvements

Beyond the main innovation, Dencun contains a series of auxiliary EIPs:

1. EIP-1153: Introduces new opcodes for temporary data storage during smart contract execution, aiming to reduce gas fees and expand platform scalability.

2. EIP-4788: Upgrades the consensus layer by integrating the Beacon block root fixation, providing faster access to current consensus data.

3. EIP-5656: Adds an optimized MCOPY opcode for more efficient in-memory data copying.

4. EIP-6493: Makes adjustments to the validator block selection mechanism, improving finality and reducing centralization risks.

5. EIP-6780: Limits the use of the SELFDESTRUCT function, enhancing ecosystem security and stability.

Dencun Upgrade Date and Testing Schedule

According to the official Ethereum roadmap, the deployment has gone through the following stages:

• January 17, 2024: Launch on the Goerli testnet
• January 30, 2024: Activation on Sepolia
• February 7, 2024: Integration into Holesky
• March 13, 2024: Full mainnet launch

Initially, the release was scheduled for Q4 2023 but was postponed after thorough discussions among developers during All Core Developer Consensus meetings. This caution was taken to ensure reliability and security of the deployment.

Impact on Gas Fee Economics

One of the most significant consequences of the update will be a rethinking of the gas payment model. EIP-4844 aims to reduce Layer-2 network fees by 10-100 times. At the time of Dencun activation, average payments were:

• For transferring ETH to Arbitrum: $0.24
• On Optimism: $0.47
• On Polygon: $0.78

After the introduction of blobs, these figures are expected to decrease proportionally, making microtransactions economically viable.

The increase in mainnet throughput — from current ~15 transactions per second (TPS) to 1000 TPS — will be achieved through more efficient processing mechanisms and load distribution.

Transformation of the Layer-2 Ecosystem

Layer-2 networks will benefit directly from the upgrade in several ways:

• Compatibility and integration: improved interaction mechanisms between layers will reduce transaction routing costs
• Speed improvements: faster processing at the base layer will directly benefit L2 solutions, accelerating finality
• Security: new cryptographic standards and protection protocols will enhance overall ecosystem reliability

According to Fidelity, after Dencun, the share of Layer-2 fees in total volume should decrease significantly.

Impact on Users and Developers

For end-users, the Dencun update promises:

• Radical speed: users will gain access to nearly instant transactions with minimal fees
• Expanded dApp capabilities: developers will be able to create more complex and functional decentralized applications without throughput limitations

The increase in data volume that the system can handle (via 1 MB per slot) allows for experimenting with new application models and creating more innovative solutions.

Strengthening ETH liquid staking mechanisms makes the platform more attractive to various participant categories: from ordinary holders to institutional investors.

Ethereum 2.0 Roadmap: Evolutionary Milestones

Key Development Milestones

Beacon Chain (December 2020): Launch of a separate Proof-of-Stake blockchain laid the foundation for subsequent transformations.

The Merge (September 2022): Merging the mainnet with the Beacon Chain and transitioning to PoS consensus reduced energy consumption by over 99.5%.

Shanghai/Capella (April 2023): Deployment of the staked Ether withdrawal mechanism and activation of staking for millions of holders.

Dencun (March 2024): Current phase focused on scalability and optimization.

Future Outlook: From Proto-Danksharding to Full Implementation

Following the successful Dencun deployment, the developer community is targeting the next update, tentatively called Electra + Prague (Petra). The agenda includes integrating Verkle trees, which will further optimize data storage.

Full Danksharding implementation remains a long-term goal, promising to split the network into many independent shards, each capable of processing operations in parallel. This will be the final step in transforming Ethereum into a truly scalable global platform.

Potential Challenges and Risks

Despite promising prospects, the upgrade carries risks:

1. Technical uncertainties: The system’s complexity creates a possibility of unforeseen errors or vulnerabilities during stabilization.

2. Interoperability issues: Legacy smart contracts and decentralized applications may require adaptation to new network parameters.

3. Fee volatility: During the transition, fluctuations in fee structures may occur until the ecosystem adapts to new mechanisms.

4. Dependence on adoption: Actual benefits largely depend on how quickly developers and users adopt the new features.

Significance for the Crypto Market

The Ethereum Dencun upgrade marks a turning point in second-generation blockchain development. For traders and investors, it opens new opportunities:

• Lower entry barriers thanks to microscopic fees
• Expansion of trading and investment strategies
• Increased attractiveness of Ethereum for institutional participants

The market as a whole anticipates synchronized ecosystem development around Ethereum, with new types of applications and financial instruments emerging.

Conclusion: A Phase of Transformation

The Ethereum Dencun upgrade signifies not just another update but a pivotal moment in blockchain evolution. With the introduction of Proto-Danksharding and blobs, the network takes a decisive step toward mass scalability. The story of Ethereum 2.0 is one of gradually overcoming limitations, and Dencun is another, yet critically important, milestone on this path.

The crypto community fully expects the moment when Ethereum becomes a platform capable of handling billions of transactions while ensuring absolute security and decentralization. The journey toward this goal has already begun, and each update, including Dencun, brings us closer to this ideal.