Ethereum, the largest ecosystem in blockchain and cryptocurrency after Bitcoin, activated a major software upgrade, the Dencun upgrade, on March 13, 2024, a move that will reduce data fees on off-chain networks like Arbitrum and Polygon. The ETH price, Ethereum’s native cryptocurrency, was somewhat impacted as a result of the latest hard fork. The most significant change the Dencun upgrade is set to introduce is EIP-4844, namely proto-danksharding. Even if the transition to the Proof of Stake consensus mechanism was a considerable development toward scaling Ethereum and its sidechains, the impact is minimal. With every upgrade, Ethereum grows and continues to close its throughput and cost gap.
Ethereum is now focusing on implementing EIP-4844, which seeks to improve data storage and reduce costs by advancing a new kind of transaction type that accepts blobs of data to store transaction data on the Beacon node for a short period of time. Proto-danksharding represents a critical step in Ethereum’s evolution and future. Via its blob-carrying transactions, Ethereum tackles scalability and flexibility issues, setting the stage for more impactful improvements. Full danksharding is the ultimate goal – it’s the realization of the rollup scaling that began with proto-danksharding. It will allow the network to process millions of transactions per second.
What Does EIP-4844 Imply for Mainstream Rollups, Like Optimistic and ZK Rollups?
Rollups ensure transaction execution outside the Ethereum mainnet, sending the transaction data back to the network. They’re designed to address Ethereum’s scalability issues. The execution of a transaction is subject to fees paid in Ether, and the costs depend on how complex the transaction is; if the gas runs out before the transaction is finalized, it will have no effect. Costs are divided into two parts: data posting and delay. In the new Ethereum improvement proposal, data posting cost matches blob posting cost, offering a more flexible cost structure. According to HackerNoon, the cost of transactions for optimistic and ZK rollups has decreased by 90% following the Dencun upgrade.
The idea behind scaling Ethereum is to have more space so that more transactions can be included in a block. After many discussions, rollups were the chosen solution; they convert scalable data into scalable execution. Dankrad Feist suggested danksharding, which is slightly complex, requiring an intermediate step – proto-danksharding. Blob-carrying transactions use rollup sequencers but without data availability checks. For rollups, the Dencun hard fork isn’t only a technical necessity but also evidence of the Ethereum community’s effort to enhance the network. Each chain can make its own decisions, so there’s no one-size-fits-all solution. In the end, rollups are the best blockchain protocols for Ethereum.
Blobs Represent a Novel Transaction Type That Incorporates Additional Data
EIP-4844 introduces blob-carrying transactions designed to help Ethereum preserve market relevance without sacrificing decentralization. After the Dencun hard fork, rollups can use blobs instead of calldata to post transactions, committed to a type of cryptography called KZG, with fixed-size proof data and forward-compatible with data availability sampling. Blobs help relieve the burden of growing block sizes and unsustainable gas costs. Ethereum sidechains will be the primary consumers of blob space, which will contain batched transactions. Users can download the blob from the off-chain storage location using the reference in the transaction. Ways of storing blobs off-chain include but aren’t limited to decentralized storage networks, centralized cloud storage providers, and specialized blob storage networks.
Ethereum has become a Layer 2-centric ecosystem – major apps have moved from Layer 1 to Layer 2, payments are Layer 2-based by default, and wallets have started to build their experience around the new environment. According to Vitalik Buterin, a vital part of the rollup-centric roadmap is separate data availability space that the Ethereum Virtual Machine doesn’t have access to. Progressively increasing blob capacity will finally bring to life the vision of data availability sampling with 16 MB per slot of data space. Separate data availability layers can reduce congestion on the Ethereum network by making it simpler for rollups to verify transaction details.
EIP-4844 Marks the First Step Towards Implementing Full Sharding
Sharding is a scaling method where the network is divided into smaller groups (shards) that can process transactions side by side on the Beacon Chain. When rollups emerged, the idea of sharding was immediately dropped. Sharding allows for more throughput because not every participant node in the network has to process every transaction. Full data sharding will take a long time and finish implementing and deploying; proto-danksharding is an intermediate step in the roadmap. Future work requires changes to the Beacon node, allowing it to work on other initiatives at the same time. Core elements of this progress have been included in major upgrades.
Danksharding is poised to create a significant amount of space for optimistic rollups to discard their compressed transaction data. Put simply, it will support an expanding ecosystem that enables countless transactions per second. Transactions for end users have become expensive and low during times of network congestion due to the security models that require a process that can’t be overridden. Protocol development has placed emphasis on addressing these issues, many of which are mitigated by Layer 2 solutions. Danksharding calls into question the blockchain trilemma by sharing the network.
The Takeaway
Following the implementation of EIP-4844, rollup sequencers can sign and broadcast blob-carrying transactions – the data is posted to and secured by the Ethereum mainnet. Optimistic rollups must furnish the full data when fraud proofs are submitted. As far as ZK rollups are concerned, it’s necessary to supply two commitments to their transaction data: the KZG in the blob and a commitment that uses any proof system the ZK leverages internally. The aim of proto-danksharding is to scale Ethereum without having to wait for full sharding to be implemented. There’s no timeline for when cross-shard transactions and seamless interoperability will be implemented, but discussions have begun in the Ethereum community.
Even if considerable improvements have been made, it’s essential to keep in mind that the Dencun upgrade is only the beginning of Ethereum’s road to growth.
