The Dencun upgrade is coming: How will Ethereum Proto-Danksharding reshape the future of blockchain?

Ethereum is ushering in a technological revolution. On March 13, 2024, the Ethereum Cancun-Deneb (Dencun) upgrade will go live on the mainnet. This is not just a routine system iteration but a milestone event that lays the foundation for large-scale Ethereum scalability. As traders and developers in the crypto community, you need to understand how this upgrade will reshape the ecosystem landscape.

The Core of the Dencun Upgrade: EIP-4844 and Proto-Danksharding

The essence of the Dencun upgrade is the EIP-4844 proposal, which introduces a brand-new concept—Proto-Danksharding. The core innovation of this technology lies in the “blobs” (data blocks) mechanism.

Traditional Ethereum transaction data storage methods are inefficient, leading to network congestion and high gas fees. EIP-4844 introduces a blob data structure with a fixed capacity of 1MB per slot, providing Ethereum with a dedicated “high-speed data channel.” These blobs are not permanently stored on the blockchain; they are retained temporarily and then automatically cleaned up. This approach meets the data availability needs of Layer-2 solutions while avoiding storage burdens on nodes.

Proto-Danksharding is a critical preparatory phase for transitioning to full Danksharding. In the future, when Ethereum achieves full Danksharding, the network will be divided into multiple independent shards, each capable of processing transactions in parallel. This will boost Ethereum’s throughput from the current approximately 15 TPS to 1000 TPS, achieving a 100 to 1000-fold expansion.

Complete Technical List of the Dencun Upgrade

In addition to EIP-4844, Dencun includes several important optimizations:

EIP-1153 introduces transient storage opcodes, allowing smart contracts to use low-cost temporary storage during execution, significantly reducing gas consumption for contract interactions.

EIP-4788 implements fixed Beacon Block Roots at the consensus layer, enabling the execution layer to access consensus data directly. This cross-layer communication capability opens new possibilities for staking derivatives and liquid staking protocols.

EIP-5656 adds the MCOPY opcode, optimizing memory data copying efficiency and further lowering contract execution costs.

EIP-6493 fine-tunes the validator block selection mechanism, improving block finality and reducing centralization risks in mining/validation.

EIP-6780 restricts the SELFDESTRUCT opcode, enhancing network security and smart contract stability.

Timeline and Deployment Process

The Dencun upgrade has undergone rigorous phased testing:

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

This schedule is delayed compared to the original plan (expected in Q4 2023), due to additional security reviews and testing decided upon by Ethereum core developers during the November consensus meeting.

Layer-2 Revolution: Significant Reduction in Gas Fees

The Dencun upgrade will have the most direct impact on the Layer-2 ecosystem. According to Fidelity data, Layer-2 transaction fees currently account for only about 10% of Layer-1 costs, and this ratio is expected to decrease further after the upgrade.

Before the upgrade, cross-chain transfers from Layer-2 back to Ethereum are generally costly. For example, ETH transfer costs on Arbitrum, Optimism, and Polygon are approximately $0.24, $0.47, and $0.78 respectively, while token swap costs are about $0.67, $0.92, and $2.85.

Post-upgrade, due to lower-cost and more efficient blob data handling, these fees are expected to decrease by 10 to 100 times. This cost optimization will be revolutionary for user experience—transactions that once cost dozens of dollars could drop to just a few cents.

From a technical perspective, Dencun improves compatibility between Layer-2 and Layer-1. Data submission becomes cheaper, and confirmation speeds increase, enabling Layer-2 applications to maintain strong security guarantees at lower costs.

A New Era of Data Availability Layers

The introduction of Proto-Danksharding has profound implications for emerging data availability (DA) solutions—such as Celestia, EigenDA, and Avail.

These DA layers originally aimed to provide low-cost data storage services for Ethereum and its Layer-2s. However, with Dencun reducing Ethereum’s own data costs significantly, DA layers face more complex challenges. Application developers will need to weigh the cost-effectiveness of native Ethereum DA versus specialized DA services.

Nevertheless, this competition also drives innovation across the ecosystem. DA layers are beginning to focus on providing differentiated services—such as ultra-low latency, enhanced privacy guarantees, or optimizations tailored for specific applications.

What Will Users and Developers Gain?

For ordinary users, the most immediate benefit of Dencun is cost reduction:

1. Layer-2 transaction costs will be significantly lowered, making microtransactions and frequent interactions feasible.

2. Faster confirmation speeds: With improved data processing efficiency, cross-chain operations from Layer-2 to Layer-1 will be completed more swiftly.

3. New application scenarios: Developers can build cost-sensitive applications, such as micro-payments, high-frequency trading, or complex financial derivatives.

For developers, Dencun offers greater design flexibility:

• 1MB blob storage capacity allows developers to design new data storage models, potentially storing certain application states on-chain.

• Opcode optimizations make complex contract logic more economical.

• Enhanced cross-layer communication opens doors for innovative cross-layer application architectures.

In terms of throughput, although individual Layer-1 TPS may not immediately reach 1000, the overall Ethereum ecosystem throughput (including Layer-2) is expected to increase by hundreds of times.

Dencun’s Position in the Ethereum 2.0 Roadmap

To understand the significance of Dencun, it’s helpful to review Ethereum’s upgrade evolution:

Phase 0: Beacon Chain (December 2020)—introduced Proof of Stake consensus, establishing a security foundation.

The Merge (September 2022)—merged the Ethereum mainnet with the Beacon Chain, completing the transition from PoW to PoS, reducing energy consumption by over 99.5%.

Shanghai/Capella upgrade (April 2023)—enabled staked ETH withdrawals, unlocking staking demand.

Dencun upgrade (March 2024)—lays the groundwork for large-scale Layer-2 applications through Proto-Danksharding.

Future plans include the Petra (Electra + Prague) upgrade, which is expected to introduce Verkle Trees, further optimizing state storage and validation efficiency.

The ultimate goal is to achieve full Danksharding, transforming Ethereum into a truly scalable infrastructure capable of handling global financial transactions.

Risks to Watch Out For

The Dencun upgrade is not without risks:

Technical complexity risk: New blob mechanisms and cross-layer communication involve complex cryptography and system design. While thoroughly tested, unforeseen edge cases may emerge in large-scale real-world applications.

Compatibility issues: Some older contracts may require re-optimization to fully leverage new opcodes. During early stages, developers and users should closely monitor compatibility.

Short-term fee volatility: In the initial weeks post-upgrade, due to application adjustments and user migration, gas fees may fluctuate. The market needs time to reach a new equilibrium.

Adoption uncertainty: The actual impact of Dencun depends on the adoption rate of Layer-2 applications and users. Slow adoption could mean the expected cost reductions are not fully realized.

The Next Step Toward Full Danksharding

Dencun is a crucial step in Ethereum’s transition from experimental scalability solutions to production-grade infrastructure. While Proto-Danksharding has limited functionality compared to full Danksharding, it validates core concepts and accumulates valuable experience for the final implementation.

Once full Danksharding is realized, Ethereum will have the ability to process multiple shards in parallel, fundamentally changing the cost and performance landscape of blockchain technology.

Final Thoughts

The Dencun upgrade marks a new phase in Ethereum development. It not only addresses pressing issues like high gas fees and Layer-2 costs but also points the way for the ecosystem’s long-term evolution. For traders, this could mean new opportunities for Layer-2 applications and related tokens; for developers, it opens the door to designing entirely new types of applications.

With Dencun landing, Ethereum is shifting from an “expensive settlement layer” to an “affordable large-scale computing platform.” The completion of this transformation will determine whether Ethereum can truly become the infrastructure for global finance.