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What is Dencun? All You Need to Know About the Latest Ethereum Upgrade

Wednesday, March 20, 2024

On March 13, 2024, the Dencun update was activated on the Ethereum mainnet. The update, among other things, introduces several technical changes necessary for the transition to danksharding and increasing the bandwidth of the blockchain.
Dencun is mostly known for its association with EIP-4844 or proto-danksharding. However, this upgrade also includes the implementation of seven more proposals that aim to enhance Ethereum (EIP) and its various aspects. The Encrypted team has analyzed each proposal in detail.

What is the Dencun update?

The Two Sides of Dencun: Consensus and Execution

Dencun is a complex update to the Ethereum network necessary for further implementing danksharding and Verkle Trees. It is the largest upgrade since Shapella, deployed in April 2023.
The Ethereum network can be visualized as having two distinct layers:

Consensus Layer: Deneb
Deneb (named after a star in the constellation Cygnus) is an EIP block responsible for validating transactions on the network. Traditionally, Ethereum relied on a proof-of-work (PoW) consensus mechanism, which requires miners to solve complex puzzles to validate transactions. While secure, PoW is computationally expensive and energy-intensive.
Deneb, implemented as part of the Merge in September 2022, transitioned Ethereum to a proof-of-stake (PoS) consensus mechanism. In PoS, validators stake their own ETH tokens to secure the network. This significantly reduces the energy consumption of the network while maintaining security. Dencun builds upon this foundation by introducing further optimizations to the consensus layer.

Execution Layer: Cancun
Cancun (named after a city in Mexico) is the execution layer where the actual computations for smart contracts take place. This layer determines what happens after a transaction is validated by the consensus layer. High traffic on the execution layer leads to congestion and high transaction fees.
Cancun, implemented as part of Dencun, focuses on improving the efficiency of the execution layer. Introducing proto-danksharding in Cancun is the most significant step towards a more scalable future for Ethereum.

Ethereal Road Map by Vitalik Buterin

How Dencun Changes Ethereum

Dencun's primary objective is to decrease the transaction fees on the Ethereum network. The extent to which the upgrade will lower the cost of ETH transactions is unknown, but according to different calculations, the fees could be several times lower.

Changes in Consensus (Deneb)

The Beacon Chain is Ethereum's consensus layer, enabling validators to interact with each other and reach a consensus on the network's current state. This mechanism includes all aspects of the Proof-of-Stake algorithm, from the queue for starting and closing the node to finalizing blocks and the deposit size. There are three EIPs related to the consensus package proposals.
EIP-7044: By activating the offer, you can create a permanent signature for voluntary withdrawal from ETH staking. This will help eliminate the issue of stakers needing more reliance on validators. Previously, market participants needed approval from validators to withdraw their staked coins, but now the developers have found a solution with the help of EIP-7044.
EIP-7045: The proposal suggests improving the network's compliance by implementing a voting system called attestations. This system will assess the level of adherence of each block to the network's rules. To increase the reliability of the network consensus, EIP-7045 will extend the submission time of certificates to gather more opinions.
EIP-7514: Developers have activated an offer that has rapidly increased the number of validators joining the network. To manage this growth, limits will be imposed on the number of validators. This is because validators are paid in ETH, which means that the increase in their number leads to an increase in the emission of Ethereum. This increase in emission negatively impacts the value of the cryptocurrency as it increases the supply of Ethereum in the market.

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Innovations in Execution (Cancun)

Deneb proposes four EIPs to enhance Ethereum Virtual Machine's (EVM) performance.
EIP-5656: The proposal will allow you to save on creating smart contracts. To reduce costs, the authors of EIP-5656 introduce a new command for the basic memory copying operation — MCOPY. The developers draw attention to the fact that the new command will not affect the operation of smart contracts deployed using a combination of the old MSTORE and MLOAD commands.
EIP-1153: The proposal helps the developers activate the concept of temporary storage, which is cleared after each transaction, meaning that it does not take up space. According to the authors, EIP-1153 will help reduce costs and abandon unsafe data exchange, a process that was necessary when working with conventional storage.
EIP-6780: The proposal is designed to rework the SELFDESTRUCT function. The team was introduced to clean the network of unnecessary or outdated information. Unfortunately, entering SELFDESTRUCT often led to unpredictable consequences. It is impossible to completely remove the function, as existing smart contracts may suffer from it. EIP-6780 will help weaken the negative influence of SELFDESTRUCT without any failures.
EIP-4788: Proposal deployment will improve the process of information exchange between the execution and consensus layers. Ego input will, among other things, simplify the operation of liquid staking and restaking platforms. Previously, they had to rely on a network of external oracles to get consensus information. Such a bundle led to additional costs. Another problem is that the platforms were forced to trust data providers. EIP-4788 allows you to receive information from the original source, bypassing intermediaries.

The road to danksharding: EIP-4844

The most anticipated component of Dencun is EIP-4844, or proto-danksharding. It makes changes to the blockchain architecture necessary for the implementation of danksharding, it integrates large binary objects (blob or blobs).
Blob transaction contains additional data compared to a standard transaction. The amount of data in a blob transaction is larger than that of a classic transaction. However, this type of transaction is cheaper than the standard transactional data (calldata) scheme, which is used for Layer 2, among other things.

Dencun is a huge step towards implementing danksharding, which will completely rebuild the blockchain architecture and probably allow Ethereum to overcome the problem of low bandwidth without sacrificing security.
By complexity and importance, Dencun update might be compared to The Merge. Although most of the innovations are aimed primarily at developers and validators, EIP-4844 will also impact ordinary ecosystem users, especially those who interact with L2.

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