Ethereum’s DenCun Update: A Game-Changer for the Network?

If you make a top 10 list using any metric conceivable, whether its market cap or sheer popularity, Ethereum almost always falls behind Bitcoin. After them, many digital assets are constantly fighting for the third to tenth-place positions. But Ethereum’s latest update, DenCun, promises to give Ethereum a boost in the journey to possibly dethroning Bitcoin.

This update has sparked several questions regarding scalability improvements and compatibility with existing smart contracts, which is why you’re reading this.

In this article, I’ll briefly discuss Ethereum, the significance of its previous updates, the DenCun update, and how it affects the network.

Enter Ethereum

Ethereum is more than just a cryptocurrency or a digital asset. Sure, you can use it to pay for goods and services, but it can do so much more. Instead, you should perceive the Ethereum network as a scalable, programmable, secure, and decentralized digital universe where any individual can build smart contracts and bring decentralized apps to life.

A better example of the Ethereum network is a playground. Instead of building sand castles in this playground, you can build anything, from financial market tools to virtual games. Ethereum’s native currency, Ether, serves as a power source. So, if the financial world refers to Bitcoin as the “gold” of the crypto ecosystem, Ethereum is the electricity.

Previous Ethereum Network Updates and Their Significance

To help understand the DenCun update, we have to discuss the previous Ethereum network updates. The first update, Frontier, happened in July 2015. Developers usually pack updates with Ethereum Improvement Proposals [EIPs], but since Frontier was the first update, there was no specific EIP. Frontier allowed developers to start testing smart contracts and building decentralized applications like Buterin envisioned when he built Ethereum.

After just a few months, the next update, Frontier Thawing, came around to remove the gas limit on the network, allowing actual transactions to take place. The next few Ethereum updates were security-focused because of an unfortunate event in June 2016. An attacker exploited a vulnerable line of code in a smart contract on the Ethereum blockchain that developers refer to as the DAO (Decentralized Autonomous Organization). This smart contract’s purpose was to create a decentralized venture capital fund, but its existence at the time did more harm than good. The attacker stole approximately 3.6 million Ether, valued at around $50 million.

This attack created a tear in the fabric of the Ethereum universe as the community became divided in opinions on how to respond to the attack. This divide stemmed from one part of the community implementing a hard fork to reverse the transactions and restore the stolen funds to their original owners. This decision led to the split of the Ethereum blockchain into two separate chains: Ethereum (ETH), which implemented the hard fork, and Ethereum Classic (ETC), which continued on the original chain without the reversal of the hack’s transactions.

After the DAO hard fork update, the Tangerine Whistle and Spurious Dragon updates dropped later that year. The first addressed security issues by increasing gas costs for opcodes[executable instructions facilitating transactions] that attackers can use in spam attacks. The Spurious Dragon update added replay attack protection to bolster the network’s resilience.

Over the next five years, the Ethereum network only experienced four updates. These updates were the Byzantium [2017], Constantinople [2019], Istanbul [2019], Muir Glacier [2020], and Berlin [2021] updates. The developers packed these updates with some well-known EIPs, such as:

1. EIP-100: Adjusting mining difficulty.
2. EIP-140: Implementation of the REVERT opcode.
3. EIP-196: Addition of precompiled contracts for elliptic curve operations.
4. EIP-197: Precompiled contracts for pairing checks.
5. EIP-1108: Reducing gas costs for certain operations.
6. EIP-1344: Addition of the CHAINID opcode.
7. EIP-1884: Repricing for trie-size-dependent opcodes.

These updates spurred improvements such as adding new transaction types to enhance flexibility and efficiency, privacy enhancements, precompiled contracts for more effective cryptographic operations, and overall network scalability.

The most recent and significant pre-DenCun update to the Ethereum network is The Merge. But before then, two updates, London and Arrow Glacier, happened. The London update completely transformed Ethereum’s transaction fee market. It implemented a base fee mechanism that made gas fees more predictable and burned a portion of the fees, reducing the overall supply of Ether. The Arrow Glacier update is a minor stopgap measure and the final “fix” to any network issue before the Merge.

As mentioned, the Merge is the biggest and most significant update before DenCun. But it wouldn’t have been possible without the launch of the Beacon chain. Beacon chain introduced Proof-of-Stake and set the stage for Ethereum’s transition.

The Merge is an update that united the Beacon Chain and Ethereum’s mainnet, shifting Ethereum’s consensus mechanism from proof-of-work to proof-of-stake. Such a shift meant the network moved to a more energy-efficient system where miners create new blocks based on the amount of cryptocurrency they hold and stake. Since Buterin’s initial long-term vision for Ethereum involved scalability and sustainability, many experts categorize The Merge as the network’s most monumental update…Well, up until March 14th, 2024.

Why Is The DenCun Update Needed?

Despite widespread popularity and adoption, several issues still plague Ethereum’s performance and user experience. But I’d say the biggest is its scalability. Ethereum’s scalability problem means the network can only handle a limited number of transactions, leading to “traffic” when there’s high demand. So far, developers have tried to fix this problem with:

1. Rollups: Think of a rollup as a bus service that transports passengers to their destination instead of them using cars. Doing this reduces traffic on the road, so developers took that idea to create rollups to minimize network traffic.
2. Sharding: If a massive library has only one librarian, it would be frustratingly slow for many people to check out books. Sharding divides the library into sections [shards] with their own librarian. This helps people check books faster, and in the context of the blockchain, it distributes workload and increases successful transactions.
3. Sidechains: Using the road analogy again, a sidechain is the provision of smaller roads[independent blockchain] to decrease traffic on a main highway[Ethereum]. So, most transactions happen on the independent blockchain, which reduces the strain on the main network.
4. State channels: A state channel is like a bar tab that you settle at the end of your time at the bar. Instead of multiple individual transactions, you can make payments in one on-chain transaction.

Even though developers have used these concepts to scale Ethereum, they haven’t been enough to solve data availability issues. These stem from its limited capacity to store and process large amounts of data on-chain, which is why developers and users alike needed the DenCun update.

What Is The DenCun Update?

As mentioned earlier, the DenCun update is another batch of Ethereum Improvement Proposals. This update is EIP-4844, and it’s one of the biggest dominoes in the journey to solving Ethereum’s scalability and data availability issues. It involves a process developers call “proto-danksharding”, an evolved form of basic sharding.

Eight more EIPs are attached to the DenCun update, beyond EIP-4844. Let’s take a quick look at them and the problems they aim to solve.

Data Availability

Out of nine EIPs, only one is dedicated to improving Ethereum’s data availability problem: EIP-4844.

EIP-4844 is the heart and core of the DenCun update. This EIP proposes data blobs that can “carry” transactions to scale the efficiency of the blockchain. What are these blobs? Well, here’s another example to help you understand them better. Picture these blobs as cargo containers on a large ship. Each container can hold a large amount of data, but instead of taking up space on the main deck (the Ethereum blockchain), they are stored below deck (off-chain). This means that the ship can carry more containers without overcrowding the deck, which in the case of Ethereum, translates to more data processing transactions without congesting the network.

Increased Smart Contract Efficiency

The DenCun update has three EIPs, the EIP-1153, EIP-6780, and EIP-5656, dedicated to increasing smart contract efficiency.

1. Temporary Data Storage (EIP-1153): This is like giving smart contracts a temporary memory to use while working on a transaction. Once the smart contract finishes with a transaction, temporary memory is cleared out. This way, smart contracts don’t have to keep unnecessary data forever, making things more efficient.
2. Restrictions on SELFDESTRUCT (EIP-6780): Smart contracts normally have a function called SELFDESTRUCT that lets them delete themselves. However, EIP-6780 restricts this function to specific situations. This helps make smart contracts more stable and predictable because they won’t just disappear unexpectedly.
3. Memory Copy Instruction (EIP-5656): This instructs the Ethereum Virtual Machine (the computer that runs smart contracts) to better handle memory. It’s like upgrading the machine with a faster way to move data around, which makes processing smart contracts more efficient.

Reduced External Dependence

EIP-4788 lets the Ethereum Virtual Machine (EVM) directly check the Beacon Chain’s block roots by keeping them in a smart contract on the execution layer. This means smart contracts can directly obtain information about the network’s consensus state without relying on outside sources or oracles.

Improved Management and Efficiency for Validators

These three EIPs (EIP-7045, EIP-7044, and EIP-7514) work together to improve the management and operations of validators on the blockchain.

1. EIP-7045 increases the maximum time slot for validators to confirm transactions on the Beacon Chain.
2. EIP-7044 makes it easier for validators to leave the network. It ensures their actions stay valid even if there are changes to the network.
3. EIP-7514 limits the number of new validators that can join the network at each time interval to 8, helping to keep the number of validators stable and manageable.

Predictable Costs for Storing Large Amounts of Data

EIP-7516 adds a new feature to Ethereum that lets smart contracts directly find out the current base fee for storing large chunks of data on the blockchain. This makes it easier for contracts that use much data, like rollups, to plan and manage their costs.

After covering the DenCun update and its key features, here’s how I think the update will affect Ethereum.

How The DenCun Update Affects The Network

The DenCun update is set to usher in a new era for Ethereum by addressing long-standing challenges and unlocking new possibilities for the network. With its focus on scalability and efficiency, the update can significantly enhance the performance of the Ethereum blockchain, making it more attractive for developers and users alike.

With the DenCun update, Ethereum can handle more transactions, reducing congestion and lowering gas fees. This improvement is crucial for Ethereum’s continued growth, as it will enable the network to support a broader range of applications and accommodate an increasing number of users.

The update’s emphasis on smart contract efficiency will also contribute to a smoother operating ecosystem. By streamlining smart contract operations and minimizing reliance on external sources, Ethereum will become a more self-sufficient and reliable platform for decentralized applications (dApps).

Overall, the DenCun update represents a significant milestone in Ethereum’s evolution. By addressing critical issues and laying the groundwork for future growth, the update should enhance Ethereum’s position as a leading platform for decentralized applications and smart contracts, potentially paving the way for Ethereum to challenge Bitcoin’s dominance in the crypto market.