a16z: Dencun, Ethereum's Biggest Upgrade Since The Merge
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a16z: Dencun, Ethereum's Biggest Upgrade Since The Merge
Why is EIP-4844 important?
Navigating Web3 tides with focused insightsWritten by: Noah Citron, Valeria Nikolaenko, a16z crypto
Translated by: Kate, Mars Finance
Last week, Ethereum underwent its largest upgrade since The Merge. "Dencun," a portmanteau of "Deneb" and "Cancun," follows the tradition of naming upgrades after stars and cities—and bundles together nine proposed network changes.
Among these proposals—known as Ethereum Improvement Proposals (EIPs)—the most anticipated is EIP-4844, widely seen as a major milestone on the path to scalability. EIP-4844 is also known as “protodanksharding” (a name inspired by developers Diederik Loerakker, aka protoolambda, and Dankrad Feist).
Why It Matters
So why is EIP-4844 important? First, it introduces the concept of “blobs”—a place to store additional temporary data within an Ethereum block. Simply put, blobs are a new location for storing rollup data added to the network. Rollups are Layer 2 (L2) services that reduce network load by processing transactions off-chain and then posting them back on-chain. Since rollups only need this data temporarily, blob data is (mostly) later forgotten by the blockchain.
Moreover, because blobs are ephemeral—like Instagram Stories (though in this case designed to expire after 18 days)—they reduce Ethereum’s reliance on permanent data storage. This is also a step toward enabling data availability sampling, allowing Ethereum to store more blob data.
Here’s a helpful analogy from a16z crypto engineer Noah Citron to summarize why all this matters:
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Imagine Ethereum as a highway.
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Mainnet transactions are like people driving alone in their cars.
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Rollups are like buses that group people together, helping to ease traffic congestion.
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EIP-4844 essentially adds a “bus-only lane” to Ethereum, making the network more efficient.
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The Dencun upgrade also paves the way for adding even more “bus lanes” in the future.
Benefits and Outcomes
Imagine if rollup data never expired. This would add approximately 83.7 GB of data per month (~31 days) to the blockchain, totaling about 985.5 GB per year. That number would only keep growing, since remember: blockchains permanently store information. By expiring regularly, blobs limit the demand for excessive data storage—especially when other data can be stored off-chain via rollups. [For a more concrete sense of blob data size: each Ethereum block targets 3 blobs, with a maximum of 6 per block. Each blob contains ~128 KB of data (a vector of 4096 elements, each about 32 bytes).]
EIP-4844 has already drastically reduced costs. For example, a transaction on the rollup provider Optimism now costs less than 0.1 cents [source: l2fees.info]—about 1,000 times cheaper than pre-upgrade transaction fees. Note, however, that these immediate cost savings are unlikely to last: as more people bundle more transactions into rollups, fees may rise due to induced demand. [If you’re interested in tracking the blob fee market, check out the Dune analytics dashboard created by Citron: the dashboard shows the current blob base fee and the percentage of target usage.]
Some estimate that Dencun could reduce costs by 10–1,000x (this is purely speculative). However, future upgrades such as PeerDAS or “full danksharding” aim to make rollups even more efficient, increasing transaction throughput by 32x. The key innovation is adding more shards to boost efficiency without significant additional cost. Thus, full sharding will allow many more “bus lanes” at the price of just one, potentially unlocking massive throughput gains in the future.
Impacts and Applications
Lower transaction costs matter to everyone, as cheaper transactions unlock entirely new categories of applications that wouldn’t make sense under higher fees.
Additionally, since Dencun introduces the concept of transient storage (EIP-1153) to the Ethereum Virtual Machine (EVM), smart contracts can now store bits of data only during a transaction—or only while executing specific contract calls—rather than permanently. This means developers can do cooler things at much lower cost, as they now have a kind of “intermediate” memory for smart contracts. Think of the impact different types of volatile memory had on semiconductor innovation…
Other developer benefits from the Dencun upgrade include improved tooling for liquid staking protocols to observe events on the Beacon Chain (from the EVM), helping decentralize these protocols. Another is the mcopy opcode, which, alongside Dencun, now makes certain memory-intensive smart contracts more efficient.
Summary:
While the long-awaited “Merge” was one of the greatest technical feats to date—transitioning Ethereum from energy-intensive proof-of-work to proof-of-stake—we are now entering the “Surge,” a series of continuous updates that will further scale Ethereum. Like all previous upgrades, this one has been in development for a long time (Ethereum even held a trusted setup ceremony for it).
But above all, all these upgrades are the result of countless developers around the world coordinating and contributing through open source.
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