Ethereum is preparing for its biggest upgrade yet, dubbed the Dencun Upgrade, that will increase the blockchains efficiency by utilizing layer two blockchains.
The upgrade will implement nine new Ethereum Improvement Proposals or EIPs where one EIP stands out as the main focus of this upgrade, which is the EIP-4844.
The EIP will transform how Ethereum communicates with its layer two blockchains, essentially increasing transaction speed and lowering the costs of transactions.
Ethereum Biggest Upgrade
According to the core team of Ethereum Foundation, the Ethereum Blockchain has a constant schedule of upgrades which occurs once or twice every year.
The schedule has become a habit for the core team as it keeps Ethereum relevant in the growing innovations of the crypto space.
Since the 2016 infamous hack of Ethereum, the blockchain has been doing upgrades consistently, but the constant upgrades of once a year have only occurred since 2018.
The last biggest upgrade of Ethereum was The Merge which transformed the Ethereum Blockchain significantly, changing its infrastructure from a monolithic blockchain to a modular blockchain and changing the consensus mechanism from Proof of Work to Proof of Stake.
While this has significantly improved Ethereum’s quality, it is still not enough to keep up with today’s newer generation of blockchains.
Ethereum’s current condition
Currently it takes Ethereum a cost of $4 per transaction on average with the cost fluctuating to as high as $100 per transaction when the blockchain is really crowded according to data from Etherscan.
Ethereum is also still standing at a transaction speed of 20 to 50 transactions per second, which is significantly lower than most blockchains that stand at thousand of transactions per second.
To help with this, Ethereum has adopted many layer two blockchains such as Arbitrum and Optimism to help process transactions faster and cheaper.
Even though the transaction is validated through the help of layer two blockchains, the transaction itself still occurs natively on the Ethereum Blockchain which is why users of Ethereum prefer to use the help of layer two blockchains.
Core Mechanisms of Dencun Upgrade, EIP-4844
But after the help of layer two blockchains it is still not enough as the Ethereum itself still lacks the scalability to help keep up with other newer generations of blockchains, hence why the Dencun Upgrade was done.
Dencun is short for Deneb and Cancun which are the two layers of Ethereum where Dencun is the consensus layer and Cancun is the execution layer.
The upgrade will implement nine EIPs essentially upgrading both, but the main focus of the upgrade is around EIP-4844 which will be focused on the Cancun layer and how it communicates with the layer two blockchains to process transactions.
How The Communication will Improve
Currently, the mechanism of transaction between the Ethereum blockchain and its layer two blockchain goes like this,
- Users submit transaction requests through smart contracts on the Ethereum blockchain.
- Ethereum blockchain detects these requests and sends it to its consensus layer. But if the consensus layer is busy, the blockchain will send the smart contracts one by one to the layer two blockchain that is helping that transaction, for example the Arbitrum blockchain.
- Arbitrum detects these smart contracts and sends it to its validators so they can validate the transaction and the smart contract itself.
- Arbitrum then gives the green light for this smart contract as it is verified and then stores the smart contract data on the Arbitrum Blockchain.
- After storing the smart contract data on the Arbitrum Blockchain, Arbitrum then sends the smart contracts one by one over to the execution layer of Ethereum where the transaction in the smart contracts will be executed and it will then be stored in the Ethereum blockchain.
Looking at the complexity of the transactions it is clear that it needs improvement, which is why EIP-4844 is the first step in accomplishing it.
The EIP-4844
The core upgrade of Dencun is the implementation of EIP-4844, which will introduce a new mechanism called Proto-Danksharding.
The upgrade will introduce a mechanism called blobs to increase efficiency of communications between Ethereum and its layer two blockchains.
Through the introductions of Blobs, transactions moved from Ethereum to its layer two blockchains or the other way around will be done in batches or as the Ethereum Foundation calls it, in Blobs, so the smart contracts do not need to be sent one by one.
Also with the Proto-Danksharding upgrade, the layer two blockchains will no longer need to store data and can erase them after around eight weeks after it is clear that the transaction is done.
Conclusion
Overall the implementation of the Dencun Upgrade is predicted to increase transaction speed to around 100,000 transactions per second and lower its gas fees to be below $0.01.
This is why the Ethereum community is excited because it will better the overall experience when using Ethereum.
The upgrade is scheduled to be done on March 13th, 2024, which is why it is good to keep an eye out on Ethereum in these next couple of days.
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