Dencun and Layer 2s: Optimism, Arbitrum and Others Get Ready for Ethereum Upgrade

Key Takeaways

• Ethereum’s Dencun update is part of Ethereum’s mass scalability push.
• The update should reduce transaction fees on many layer 2s.
• The update is likely to bring in swathes of new users and innovation.

In a matter of hours , the highly anticipated Dencun update will go live on the Ethereum network.

The upgrade, which should reduce gas fees, could provide huge benefits and enhanced capabilities to Layer-2 (L2) networks such as Polygon, Optimism, Arbitrum, and dozens of others when it launches at around 1.55pm GMT.

Ethereum’s Dencun Update

Following years of planning and some delays, Dencun comprises two simultaneous updates, Deneb and Cancun. It is the biggest change to Ethereum since The Merge brought in a proof-of-stake consensus mechanism in September 2022.

Excitement has been mounting around the update for some time. It prioritizes tackling the blockchain trilemma of scalability, efficiency, and security through the implementation of nine Ethereum Improvement Proposals  (EIPs).

Naturally, a great deal of excitement comes as a result of the projected reduction in gas fees. Dencun will make L2 transactions considerably cheaper than they have ever been.

Additionally, this is a major step towards Ethereum realizing its vision of being able to handle hundreds of thousands, if not millions of transactions per second (TPS).

Disruptions are to be expected as the update takes place. Exchanges such as Coinbase , Kraken , and others expect delays or downtime as they adjust to the upgrade.

Transactions in Blobs

It’s fair to say that Dencun is massive in both scope and ambition. The introduction of “Proto-Danksharding”, or EIP-4844 , is perhaps the most imporant part of the hard fork.

Proto-Danksharding brings “blob-carrying transactions ” to Ethereum, a new means of storing transaction data, as well as its first attempt at “sharding”, a process in which the blockchain is broken up into mini-chains to process more transactions follower costs.

L2 networks such as rollups already compress transactions into batches so that they can scale transaction volumes. With blobs, they’ll have extra storage space for processing transaction data, within a more data-efficient dedicated “blobspace”.

This could see L2s process and settle higher volumes of data more efficiently, which would ultimately reduce costs for users. When paired with Proto-Danksharding , the first step toward full Danksharding, transactions can be processed at even higher volumes for lower costs.

Ethereum Adoption and Dencun

The end goal for Ethereum is to establish data sharding, or Danksharding. However, it says this “will still take a considerable amount of time to finish implementing and deploying”.

It’s a significant part of Ethereum’s long-term vision to bring its technology and ecosystem to the masses. Although it is one of the most widely adopted blockchains, with ETH boasting a market cap of almost $500 billion, adoption rates have stagnated under the weight of its often costly and slow transactions.

This is partly why competitors such as Solana have gained such traction in recent years as users. With developers, and businesses seeking more efficient networks to transact on, Ethereum hopes Dencun can bring them back to the network.

In a matter of hours, Ethereum’s massive Dencun update will go live. Should it be a success and achieve all it has set out to do, Ethereum (ETH) could be well on the way to outperform the competition throughout 2024.