What will the next Ethereum hard fork “Dencun” bring?

Over the past year, the Ethereum blockchain has successfully implemented some of the most important and technologically significant upgrades, such as the Shanghai upgrade. Now, developers are hard at work preparing for “Dencun” (Cancun + Deneb), which focuses on scalability through proto-danksharding (also known as EIP-4844).

Since 2014, the Ethereum blockchain has undergone a number of improvements, helping it maintain its status as a top smart contract platform. Over the years, these upgrades have focused on various aspects, such as improving efficiency, account abstraction, proof of stake, and changes to the fee structure, all of which will make Ethereum a near-instant decentralized computing layer for Web3.

After the Shanghai upgrade (which enabled staking withdrawals in April 2023), the focus for developers has shifted to improving Ethereum’s scalability, achieving faster transactions and lower fees through a technology called proto-danksharding.

Sharding is a relatively mature scalability concept, which involves breaking the blockchain down into smaller parts or shards, each of which handles a portion of the total transactions. This allows for parallel processing of transactions, thus improving efficiency. Each shard has a subset of all the nodes in the network, which will process the transactions for its shard. Some blockchains have already implemented sharding, such as Harmony and NEAR Protocol.

Around 2020, Ethereum shifted towards a roadmap centered on rollups and planned to primarily use layer 2 for scaling rather than increasing transaction time on the base layer. As a result, its sharding strategy shifted from creating more space for transactions to providing space for blobs (data standard for post-shard Ethereum) or simple storage space hosted by the mainnet but not further resolved. These blobs will store data from layer 2, which can be cryptographically verified off-chain through zero-knowledge proofs and other technologies.

Sharding is named after Ethereum researcher Dankrad Feist, and its main innovation is the use of merged market fees.

At present, Ethereum blocks are built and proposed by the same source, which has led to the emergence of Maximum Extractable Value (MEV), which refers to block validators manipulating the order of transactions to profit from them. For example, if there is a purchase order for a token in a block, the MEV sandwich attack will cause the block validators to arrange the transactions in order of their purchase of a large amount of the token and raising the price, followed by the user’s purchase order further raising the price, and finally the validator’s sell order.

Danksharding introduces a merged market fee and a proposer/builder separation mechanism, which means that the roles of builder and proposer are separated. Builders will create blocks and bid to have them included, and a proposer for each block will choose the transaction order based on this bid, but cannot see the transactions themselves. This will help prevent MEV attacks from stealing billions of dollars from Ethereum users.

Proto-danksharding is the first step towards a complete danksharding implementation, named after Ethereum researcher Proto Lambda. Its primary goal is to introduce the blob data structure mentioned earlier. Storing data in blobs is much cheaper than Ethereum’s transaction data because it is incompatible with Ethereum’s execution engine and will be used for second-layer transaction information. Therefore, interaction with Ethereum’s second layer will become much cheaper while retaining the security and decentralization advantages of the Ethereum mainnet.

One concern with introducing blobs is that it will significantly increase the size of Ethereum blocks. Hardware requirements for running nodes may become very expensive, leading to greater centralization of the network. To address this issue, future Ethereum upgrades may automatically delete blob information after a period of time, sacrificing the ability to store the complete blockchain transaction history of Ethereum, but as Ethereum founder Vitalik Buterin said, “The purpose of the Ethereum consensus protocol is not to guarantee the permanent storage of all historical data. Instead, the goal is to provide a highly secure real-time bulletin board and leave room for other decentralized protocols to store data for longer periods of time.”

Introducing proto-danksharding in EIP-4844 and Cancun-Deneb will pave the way for a complete danksharding implementation, which will reduce fees, increase transaction times, and create a more efficient, MEV-minimizing blockchain. The expected time for the upgrade has not been finalized, but is expected to be released before the end of this year.

Author: BlockingBitpushNews Lincoln Murr, Mary Liu

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