Introduction of "Proto-DankSharding" in Cancun upgrade, what market impacts will it bring?

24-02-18 20:00

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Original Title: "Dencun Upgrade Technology Overview and Potential Market Impact"

Original Source: Ebunker Chinese

Ethereum's Dencun upgrade will introduce "Proto-DankSharding" aimed at reducing transaction costs and addressing scalability for L2 blockchains. This upgrade is part of Ethereum's grand strategy to enhance its users' scalability and reduce transaction costs. This article will briefly introduce the technical components and development process of the Dencun upgrade, as well as its potential impact on the transaction capacity and cost efficiency of the Ethereum network.

Dencun Core Functionality: Proto-DankSharding

Proto-DankSharding is the core upgrade of Dencun, which can reduce the transaction cost of L2 blockchain and reduce the cost of data availability, thus solving the critical scalability challenge. This will lay the foundation for the eventual implementation of "Danksharding" and further expand these benefits.

Development Process

Dencun Upgrade is the abbreviation of Cancun-Deneb, where Cancun focuses on network scalability at the execution layer, while Deneb focuses on improving the consensus layer of Ethereum. In this upgrade, EIP-4844 is the core content, and improvement proposals such as EIP-1153, EIP-4788, EIP-6780, and EIP-7514 are also part of the upgrade.

The deployment process of Dencun upgrade includes activation on various test networks. After the activation on the Goerli and Sepolia test networks at the end of January this year, the final stage of testing was also successfully completed on the Holesky test network on February 7th.

The final version of the Ethereum client with Dencun functionality is expected to be released before February 22nd. Validators have about two weeks left to install the updated client version on their nodes.

Currently, Ethereum developers have shared information about Geth V1.13.12, also known as Edolus, and plan to conduct the Dencun upgrade on the mainnet at block height 8626176 on March 13th at 13:55 UTC. This date needs to be approved by developers and confirmed through the open-source software platform GitHub.

Dencun's Technological Innovation for Upgrades

Dencun's upgrade introduces one of the famous technological innovations, "blob", which aims to reduce storage and processing requirements by temporarily storing and off-chain compressing large amounts of transaction data through Ethereum nodes. Blob can temporarily store data, which is only necessary for short-term transaction verification, and the data can be deleted to prevent network storage overload. The security and effectiveness of the data processing process are ensured by encryption technology that detects data changes.

According to previous reports, Proto-Danksharding will reduce the number of blobs per block to 16, with each blob not exceeding 128KB in size. As a result, block space is expected to increase by approximately 2MB. The additional data space will enable optimistic and zero-knowledge rollups to publish proofs of transaction data on-chain, which will provide actual data through blobs instead of "calldata". The blob data will be removed after two weeks, while "calldata" will be stored indefinitely on the Ethereum blockchain.

Impact on Trading Ability and Costs

After the implementation of Dencun upgrade, it is expected to significantly improve the transaction processing capacity of Ethereum, ultimately enabling the network to process 30,000-100,000 transactions per second. This enhancement is crucial for the ability of the Ethereum ecosystem to support the continuously growing DAPPs and users.

In addition, the Dencun upgrade will reduce the costs associated with Ethereum's internal and rollup by 10 times, improving Ethereum's scalability and cost-effectiveness. Specifically, this upgrade will reduce Ethereum transaction costs from the current average of $0.23 to $0.02, which could accelerate the adoption of Ethereum rollup roadmap. At the same time, lower costs will make L2 solutions more attractive and competitive.

Due to EIP-4844, the block space fees for rollup payments can be reduced by more than 10 times, and the Dencun upgrade may reduce the fee revenue of the Ethereum protocol in the short term. The success of this upgrade can be measured by several indicators: L2 adopts blob transaction type; L2 sorter fee payment is reduced; L2 transaction fees are reduced; blob fees are increased, making "spam" data economically unfeasible; Ethereum will be used as the data availability (DA) in the long term, rather than competitive alternatives such as Celestia.

Impact on Validators and Staking Operators

The expansion of staking service providers such as Lido and Rocketpool (as well as the staking volume from major participants such as Coinbase, Binance, and Kraken) has been one of the most important areas of active research in the Ethereum community to improve the security of the Ethereum network.

Ebunker believes that as the ETH staking amount increases, the consensus layer bears greater pressure. A large number of validators will lead to an increase in gossip messages and the size of the beacon state, and the archived Lighthouse nodes currently occupy 16TB of space.

Although it is possible to reduce the growth rate of information and beacon state by increasing the maximum effective balance (currently 32 ETH), introducing such changes requires a delicate balance, which will increase the threshold for Solo Ethereum validators.

Dencun's upgrade is already working on addressing this issue. Some solutions, such as EIP-7514's increase in Max Epoch Churn limit, may reduce the speed at which new validators join the network.

Dencun Market Impact of Upgrade

Dencun's upgrade may affect the market value of the Ethereum network, mainly in the following aspects:

Network Function Enhancement: Dencun upgrade can significantly improve the transaction processing capability of Ethereum and reduce costs, attracting more developers and users to enter the Ethereum ecosystem. The improvement of Ethereum network efficiency and adoption rate may drive demand for ETH and have a corresponding impact on its price.

Investor Perception: The successful deployment of Dencun can enhance investors' confidence in Ethereum's long-term survival and its development team's ability to execute complex upgrades. This perceptible reliability and forward momentum may impact Ethereum's attractiveness as an investment, potentially leading to an increase in Ethereum's investment value.

Market speculation and emotions: The cryptocurrency market is highly sensitive to investors' emotions. Expectations of positive news or market reactions to the successful implementation of Dencun upgrades may lead to short-term price fluctuations, and traders and investors may also adjust their positions based on their expectations of the impact on Ethereum's functionality and market position.

With the successful activation of Dencun upgrade on the Ethereum testnet and its full implementation on the mainnet scheduled for March, the transaction processing capacity and efficiency of Ethereum will be greatly improved. Overall, the Dencun upgrade is a huge evolution for Ethereum, addressing issues of direct and long-term scalability, security, and efficiency.

This upgrade aims to optimize data availability and staking operations. The EIP will significantly enhance the network's performance and user experience. The Dencun upgrade addresses urgent challenges faced by the blockchain network by implementing Proto-Danksharding and introducing blob. It is a milestone in Ethereum's continuous efforts to improve scalability and reduce transaction costs.