Dencun upgrade is here: How will this Ethereum transformation change your transaction costs?

Ethereum is about to undergo a major upgrade—Dencun. This upgrade plan, codenamed Cancun-Deneb, officially launches in the first quarter of 2024. It is not only a hot topic among tech enthusiasts but also directly impacts every Ethereum user’s wallet. What is the core content? Simply put, it is to optimize network data storage through Proto-Danksharding (EIP-4844 proposal), ultimately leading to a significant reduction in Gas fees.

Proto-Danksharding: The Key to Breaking Ethereum Congestion

Imagine Ethereum as a highway, and Proto-Danksharding as adding lanes. This technology introduces the concept of “blobs” (data blocks), allowing the network to process more data simultaneously without crowding on the main chain as before.

The essence of EIP-4844 is straightforward: it creates a dedicated channel for Layer-2 solutions. Previously, Layer-2 needed to compress all transaction data and store it on the mainnet. Now, it can utilize these temporary data storage areas. What’s the result? According to multiple sources, Gas fees on Layer-2 could drop by 10 to 100 times.

But Dencun includes more than just EIP-4844. The upgrade also features several other key improvements:

EIP-1153 introduces temporary storage operation codes, reducing Gas consumption during smart contract execution.

EIP-4788 makes consensus layer information directly visible to the application layer, seemingly simple but greatly improving on-chain application efficiency.

EIP-5656 adds the MCOPY instruction, making memory data copying more efficient—seemingly minor but directly lowering contract operation costs.

EIP-6780 restricts the SELFDESTRUCT function as a security enhancement.

EIP-6493 fine-tunes the validator’s block selection mechanism, promoting network decentralization.

Upgrade Timeline: Already Started, Official Launch on March 13

If you’ve been waiting for this upgrade, good news—it’s already running on the testnet.

Starting January 17, 2024, the Dencun upgrade was launched on the Goerli testnet. Over the next two weeks, deployments on Sepolia (January 30) and Holesky (February 7) testnets were also completed. The performance of each testnet was carefully monitored, and any potential issues were captured and fixed.

The key date is March 13, 2024—when Ethereum mainnet officially activates Dencun. This was originally scheduled for Q4 2023 but was delayed to allow developers more time to discuss details.

The Truth Behind the Numbers: How Cheap Can Layer-2 Transaction Fees Get?

Let’s look at actual figures. On the eve of the upgrade, according to L2fees data:

Transferring ETH to Arbitrum costs about $0.24 on average; to Optimism about $0.47; to Polygon about $0.78.

What about token swaps? On Arbitrum around $0.67, on Optimism about $0.92, on Polygon about $2.85.

After Dencun activation, these numbers are expected to drop significantly. According to Fidelity’s analysis, currently, Layer-2 fees account for about 10% of Layer-1 total costs. Post-upgrade, this proportion will continue to decrease. For everyday traders, what does this mean? If you frequently operate on these Layer-2 networks, your transaction costs could drop to one-tenth or even less of what they are now.

Ethereum Performance Leap: From 15 TPS to 1000 TPS

This is the most exciting part. Before the upgrade, Ethereum’s throughput was about 15 transactions per second (TPS). After the upgrade, it is expected to reach 1000 TPS—a 67-fold increase.

While this figure mainly comes from Layer-2 solutions, it reflects the real market impact: network congestion will improve significantly, transaction confirmation speeds will accelerate, and Gas prices will become more stable.

The core goal of this upgrade is to enable Ethereum to handle more transactions while reducing the cost per transaction. The official even set a bold target: to bring Gas fees below $0.001 in the future, and to increase Ethereum’s scalability by 100 to 1000 times.

How Will Layer-2 Networks Benefit?

Ethereum’s second-layer networks (Arbitrum, Optimism, Polygon, etc.) are the biggest beneficiaries of Dencun.

First, reduced cross-layer interaction costs. Operations from mainnet to Layer-2 and back will become much cheaper. Currently, these operations often account for a large part of total costs. After the upgrade, users will save a significant amount.

Second, increased data throughput capacity. Layer-2 solutions, previously limited by mainnet data availability, can now handle double or more transaction volume thanks to the blob mechanism.

Third, improved application experience. Lower fees and faster speeds directly translate into better user experiences. Wallet transfers, DEX swaps, lending operations—all will become smoother and cheaper.

Data availability solutions like Celestia, EigenDA, and Avail will also benefit, as Dencun’s release increases demand for data storage infrastructure.

What Does This Mean for Ordinary Users and Developers?

For users: If you often trade on Ethereum or its Layer-2 networks, you will directly feel two changes—lower costs and faster speeds. Especially small traders previously blocked by high Gas fees now have a chance to re-engage.

For developers: Cheaper execution costs mean you can design more complex and feature-rich smart contracts without worrying about Gas consumption. The fixed 1 MB/slot data throughput opens up new application scenarios. From NFT markets to DeFi protocols and GameFi projects, the development space is greatly expanded.

For the ecosystem: Stablecoins, lending protocols, exchanges, and other infrastructure can support more users and transactions. Ethereum’s ecosystem is poised for a new growth cycle.

Progress of Ethereum 2.0: Dencun Is Just a Midway Station

To understand Dencun’s place in the overall upgrade roadmap, we need to review Ethereum’s evolution.

In December 2020, the Beacon Chain launched, laying the foundation for Ethereum’s proof-of-stake mechanism.

On September 15, 2022, The Merge occurred—one of the most significant moments in Ethereum history. The mainnet merged with the Beacon Chain, switching Ethereum from proof-of-work to proof-of-stake, reducing energy consumption by over 99.5%.

In April 2023, Shanghai/Capella upgrades enabled users to unlock staked ETH and its rewards, boosting staking participation.

Now, it’s Dencun’s turn. It is not the end but a transitional phase toward full Danksharding. After the upgrade, the community’s next goal is Electra+Prague (codenamed Petra), which will introduce new data structures like Verkle Trees to further optimize storage efficiency.

The ultimate goal is full Danksharding, where Ethereum will be divided into multiple independent shards processing transactions, achieving massive scalability.

Risks to Watch Out For

Any large-scale upgrade carries risks. Dencun is no exception.

Technical risks: Although tested on multiple testnets, unforeseen bugs or performance issues may still appear after mainnet launch. However, Ethereum developers are well prepared.

Compatibility risks: Some older smart contracts may need adjustments to fully utilize new features. Short-term, some applications might experience temporary instability.

Market expectation risks: Once the upgrade is live, hype before the upgrade may subside. This could lead to short-term market adjustments.

Adoption risks: The extent of Gas fee reduction ultimately depends on developer and user adoption speed. If Layer-2 applications do not migrate en masse, the fee reduction may fall short of expectations.

Summary: Why Is Dencun So Important?

The core contribution of the Dencun upgrade is: enabling Ethereum to handle more transactions cheaply through Proto-Danksharding.

For traders, this means lower costs and better experience. For developers, it opens up creative possibilities. For the entire ecosystem, it is a crucial step toward large-scale adoption.

Although full Danksharding still requires time, Dencun already demonstrates a clear future for Ethereum: a low-cost blockchain capable of supporting global users and applications.

The upgrade has started, and mainnet deployment is imminent. Are you ready?