Analysis, Ethereum

What's Next For Ethereum?

Dencun is coming. Get ready for blobs.
David C David C Jan 23, 20243 min read
What's Next For Ethereum?

A shift in the sails of crypto has seemingly made Ethereum a contrarian bet in recent months.

But there's never been a better time to be bullish on ETH. The Dencun upgrade is imminent and will be a game-changer, driving the network closer to an immensely scalable future. Rollups, validators, and the network’s overall security will all receive upgrades — significantly strengthening Ethereum’s overall operational landscape. 

This month's outsized ETH dominance can be attributed to a host of factors, including speculation around a spot ether ETF, yet it also reflects a deeper market recognition of Ethereum's enduring adaptability. Dencun is not just another incremental update but is a critical step in Ethereum’s strategy to solidify its dominance.

Here's what you need to know. 👇

What is Ethereum's Dencun Upgrade?

At its core, Dencun (also called Cancun-Deneb) introduces blob-carrying transactions through Ethereum Improvement Protocol 4844 (EIP-4844) — an upgrade set to drastically lower L2 costs, lay the foundation for expansive rollup scaling, and significantly impact Ethereum. 

🪼 Blobs vs Blocks: Now, blocks will reserve space for blob transactions – transactions exclusively holding L2 data. This data will be offloaded directly to the consensus layer, potentially cutting Layer 2 costs by over 10x.

If Ethereum is a highway, Dencun installs an express lane. It's steering us toward a future where scalability is no longer a bottleneck.

Want more technical details? Check out our September article WTF is a Blob?

📊 Economics of Layer 2s: EIP-4844 is set to nearly triple Layer 2 operating margins from 35% to 86-95%. This isn’t just good news for the platforms; it’s a win for users, too. Lower costs for Layer 2s give us cheaper transactions while potentially providing networks more capital to run more growth operations.

Imagine a future where L2s encourage adoption by sharing transaction revenue with users or using this money to power incentive programs.

🆙 Surge to Scourge: The third key element of Dencun is about setting the stage. As Dencun marks the official start of Ethereum’s second, scaling-centric phase, the Surge, attention can now be allocated towards its following phase, the Scourge.

Recently, Vitalik shared an updated roadmap for Ethereum, which showed the goal of the Scourge shifting toward a focus on directly combatting Proof of Stake centralization, something that will only become more critical as Ethereum enters the restaking era.

What Else Does Dencun Do?

While EIP-4844 is the standout feature of Dencun, it's not the only one! Dencun includes nine EIPs, enhancing everything from security to the staking experience. These include:

  • EIPs 4788 & 6780 = Increased Security: EIP-4788 integrates a native oracle into Ethereum, enhancing data synchronization accuracy across layers. EIP-6780 overhauls the SELFDESTRUCT feature in smart contracts for safer code removal.
  • EIPs 7044 & 7045 = Better Staking Experience: These EIPs enhance staking reliability and extend the validators’ attestation submission window. These upgrades make the process more accommodating, increasing validators' chances of participating in consensus and earning block rewards.
  • EIP-1153 = Transaction-Long Data Storage: EIP-1153 introduces transitory storage to Ethereum, allowing temporary data storage during transactions. Think of it as a temporary workspace created at the transaction's start and emptied upon completion. This reduces costs and improves the efficiency of complex transactions.

Additionally, there's talk of increasing the gas limit, a move Vitalik suggests could happen even now without Dencun. This would allow more transactions per block, potentially easing congestion and reducing fees. As Dencun prepares Ethereum for rollups, renewed discussion around this makes sense.

All in All

Dencun marks another major turning point for Ethereum.

EIP-4844, with its blob-carrying transactions, is more than a technical upgrade. It positions Ethereum as a response to parallelized EVM, monolithic chains — setting the stage for hundreds of chains to operate efficiently atop the network. 

But Dencun's story extends beyond EIP-4844. From security enhancements to improved staking experiences and transient data storage, each component of Dencun nudges the world computer closer to its vision, with all of crypto as a solar system orbiting Ethereum’s sun.

Dencun stands as a testament to diligence, vision, and patient execution. It's a reminder that Ethereum doesn't just compete — it sets the pace. The tortoise and the hare analogy is apt here; while there are many hares out there, we all know who wins the race.

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David C

Written by David C

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David is a writer/analyst at Bankless. Prior to joining Bankless, he worked for a series of early-stage crypto startups and on grants from the Ethereum, Solana, and Urbit Foundations. He graduated from Skidmore College in New York. He currently lives in the Midwest and enjoys NFTs, but no longer participates in them.

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