Ethereum Dencun Upgrade Launches: How EIP-4844 Will Revolutionize the Layer-2 Ecosystem

On March 13, 2024, Ethereum officially launched the Dencun upgrade, which is not only a milestone in network evolution but also a turning point for the entire ecosystem. As Web3 infrastructure, Ethereum has long faced the “Impossible Triangle”—security, decentralization, and scalability—and this upgrade finally provides a breakthrough.

EIP-4844: The Opening of the Proto-Danksharding Era

The core innovation of the Dencun upgrade is the EIP-4844 proposal, which introduces Proto-Danksharding technology. In simple terms, this technology allows Ethereum to temporarily store larger data packets (called “blobs”) without permanently saving them.

Under traditional models, Layer-2 networks must write the full data of each transaction to the Ethereum mainnet, leading to high gas fees. EIP-4844 changes this logic—it creates a dedicated data channel for Layer-2, where data can exist temporarily and then be automatically deleted.

What does this mean? Data shows that transaction costs on Arbitrum, Optimism, and Polygon were previously $0.24, $0.47, and $0.78 respectively, with token swap fees reaching as high as $0.67–$2.85. After the Dencun upgrade, Layer-2 network gas fees are expected to decrease by 10–100 times.

Upgrade Timeline Review

The Dencun upgrade was not sudden. The Ethereum community underwent a systematic testing cycle:

• January 17: Activation on Goerli testnet
• January 30: Activation on Sepolia testnet
• February 7: Activation on Holesky testnet
• March 13: Mainnet deployment

This phased release strategy ensures stability. Compared to the originally scheduled Q4 2023 launch, the timeline was delayed by a few months due to additional optimization discussions at the core developer meeting in November.

Five Major EIP Changes Behind Proto-Danksharding

Dencun is not only about EIP-4844 but also includes several protocol-level improvements:

EIP-1153 introduces temporary storage opcodes, allowing smart contracts to temporarily store data during execution. This directly reduces gas consumption and improves contract efficiency.

EIP-4788 passes the Beacon chain’s block roots to the execution layer, enabling the mainnet to access consensus layer information directly. This breaks data silos between two networks and opens new possibilities for cross-layer applications.

EIP-5656 optimizes the MCOPY opcode for memory copying, reducing unnecessary computational costs.

EIP-6493 adjusts how validators select blocks, improving chain finality and reducing centralization risks.

EIP-6780 restricts the SELFDESTRUCT function, enhancing network security.

Layer-2 Networks: From “Expensive Alternative” to “Mainstream Choice”

The Dencun upgrade has an immediate impact on the Layer-2 ecosystem. According to Fidelity data, Layer-2 currently accounts for about 10% of Ethereum’s total gas fees, and this ratio is expected to drop significantly after the upgrade.

Cost Revolution: Previously, a cross-chain transaction might cost several dollars in gas; now, it could be just a few cents. This will attract many small and medium users to migrate to Layer-2.

Application Explosion: Lower costs mean developers can build more complex applications. DeFi protocols can perform more frequent automation, and gaming applications can support more real-time interactions.

Ecosystem Restructuring: Projects that were forced to stay on other blockchains due to high costs now have reasons to reconsider returning to Ethereum Layer-2.

Practical Impact on Traders and Users

Transaction Costs: Suppose you perform a token swap on Optimism; previously, it required $0.92 in gas fees, but after the upgrade, it might drop to $0.09–$0.092. For frequent traders, this difference is significant.

Network Congestion Relief: Ethereum mainnet throughput increases from about 15 TPS to 1000 TPS (via Layer-2 aggregation). This means less queuing and faster confirmations.

New Opportunity Windows: Micro-financial applications, small payments, and frequent trading strategies that were previously infeasible due to high fees are now possible.

ETH Staking Ecosystem Optimization: The Dencun upgrade, combined with Ethereum’s staking mechanism, enhances the appeal of liquidity staking protocols. Users can participate in staking and earn yields while maintaining liquidity.

Why Proto-Danksharding Is a Temporary Solution

It’s important to understand that Proto-Danksharding is not the ultimate solution but a bridge to full Danksharding.

Full Danksharding will truly realize network sharding—Ethereum will be divided into multiple parallel shard chains that process transactions independently. At that point, Ethereum’s throughput will not just increase 10 or 100 times but will fundamentally break through hardware and network topology limitations.

Proto-Danksharding is akin to a “temporary parking zone”—it alleviates pressure quickly through a temporary storage mechanism without overhauling the entire network. Once full Danksharding is implemented in Petra or subsequent upgrades, the value of these temporary data spaces could further increase.

Technical Risks and Transition Considerations

Any upgrade carries risks. Before Dencun, attention should be paid to:

Compatibility Issues: Some old contracts may need redeployment to fully utilize new features. The developer community needs time to adapt.

Network Volatility: During initial phases, gas fees may fluctuate temporarily. When large numbers of users migrate to Layer-2, these fees might spike until demand stabilizes.

Adoption Curve: Cost reduction is necessary but not sufficient. Whether users truly migrate to Layer-2 depends on the maturity of the application ecosystem.

Outlook: From Dencun to Petra

Ethereum’s roadmap does not end with Dencun. The next phase, Petra (a combination of Electra + Prague), is expected to introduce Verkle Trees, an innovative data structure that will further optimize storage and proof mechanisms.

Full Danksharding may be realized after Petra, leading to a fundamental change in Ethereum’s architecture. Proto-Danksharding is a necessary step in this long-term vision—it addresses immediate issues and lays the foundation for future scalability.

Key Recommendations

For traders and developers:

• Keep a close eye on Layer-2 fee changes to identify arbitrage or reallocation opportunities
• If you hold long-term positions on Arbitrum, Optimism, or Polygon, the upgraded environment will be more conducive to executing complex trading strategies
• Watch which applications will deploy new features first—they may become the next growth winners

The Dencun upgrade marks the true beginning of Ethereum’s evolution from “high cost, high security” to “low cost, high security.” It is not only a technological advancement but also an ecosystem democratization—operations once only affordable for large players are now accessible to retail users.