Ethereum Kunkan Upgrade Technical Overview and Potential Market Impact

The Ethereum Dencun upgrade plan introduces "Proto-DankSharding" technology, aiming to improve the transaction efficiency of the L2 blockchain and solve scalability issues. This upgrade is a key component of Ethereum’s strategy to enhance user experience and reduce transaction costs. This article will briefly introduce the technical points, development progress, and potential impact on the Ethereum network’s transaction processing capabilities and cost efficiency of the Dencun upgrade.

Dencun Core Features: Proto-DankSharding

Proto-DankSharding is a key upgrade of Dencun designed to reduce transaction costs and data availability costs of L2 blockchain to solve scalability challenges. This initiative will lay the foundation for the eventual realization of “Danksharding” and further expand its benefits.

Development process

Dencun upgrade is the abbreviation of Cancun-Deneb, where Cancun focuses on the network scalability of the execution layer, and Deneb focuses on improving the consensus layer of Ethereum. In this upgrade, EIP-4844 is the core content, and improvement proposals such as EIP-1153, EIP-4788, EIP-6780 and EIP-7514 are also part of the upgrade.

#The deployment process of Dencun upgrade includes activation on different test networks. At the end of January this year, it was successfully activated on the Goerli and Sepolia testnets, and then completed the final phase of testing on the Holesky testnet on February 7.

The final version of the Dencun-capable Ethereum client is expected to be released by February 22, which means validators will need to install the updated client version on their nodes within two weeks.

Currently, the developers of Ethereum have released the update to Geth V1.13.12, codenamed Edolus, and plan to launch it when the block height of the mainnet reaches 8626176 at 13:55 UTC on March 13 Dencun upgrade. This date requires developer approval and confirmation via open source software platform GitHub. This update will bring some key improvements and fixes to improve the performance and security of the Ethereum network. Developers encourage all parties involved to promptly update their node software to ensure they can successfully participate in new upgrades and continue to support the stable operation of the Ethereum network.

Technical innovation of Dencun upgrade

Dencun upgrade introduces a well-known technological innovation-"blob", which is designed to temporarily store and off-chain compress large amounts of transaction data through Ethereum nodes to Reduce storage and handling requirements. Blobs have the ability to store data for a short period of time, which is critical for transaction verification, but also have the ability to eventually delete data to prevent network storage from being overloaded. The security and validity of data processing are ensured by encryption technology to detect data changes.

According to previous reports, Proto-Danksharding plans to reduce the number of blobs in each block to 16 and ensure that the size of each blob does not exceed 128KB. This move is expected to increase block space by approximately 2MB. The additional data space will provide opportunities for optimistic and zero-knowledge rollups to publish proofs of transaction data on-chain. These proofs will provide actual data via blobs rather than "calldata". It is worth noting that the blob data will be deleted after two weeks, while the "calldata" will be permanently stored on the Ethereum blockchain.

Impact on transaction capabilities and costs

After implementation, the Dencun upgrade is expected to significantly improve Ethereum’s transaction processing capabilities, ultimately enabling the network to process 30,000-100,000 transactions per second. This enhancement is critical to Ethereum’s ability to support a growing ecosystem of DAPPs and users.

In addition, the Dencun upgrade will reduce Ethereum’s internal and rollup-related costs by 10 times, improving Ethereum’s scalability and cost-effectiveness. Specifically, the upgrade will reduce Ethereum transaction costs from the current average of $0.23 to $0.02, a change that could accelerate adoption of the Ethereum rollup roadmap. At the same time, lower costs will make L2 solutions more attractive and competitive.

Due to EIP-4844’s ability to reduce rollup block space fees by more than 10 times, the Dencun upgrade may reduce the Ethereum protocol’s fee income in the short term. The success of this upgrade can be measured by several metrics: L2 adopts the blob transaction type; L2 sorter fee payments are reduced; L2's transaction fees are reduced; blob fees are increased, making "spamming" data no longer economically viable; long-term Ethereum will be adopted for data availability (DA) instead of competing alternatives such as Celestia and others.

Impact on Validators and Staking Operators

Staking services like Lido and Rocketpool (as well as staking volumes from major players like Coinbase, Binance, and Kraken) have been scaling for Ethereum One of the most important areas of active research in the community to improve the security of the Ethereum network.

Ebunker believes that as the amount of ETH pledged increases, the consensus layer bears greater pressure. A large number of validators will lead to an increase in gossip messages and the size of the beacon state. The archived Lighthouse node currently takes up 16TB of space.

While it is possible to reduce the growth rate of message volume and beacon status by increasing the maximum effective balance (currently 32 ETH), introducing such changes requires a delicate balance, which will increase Solo Ethereum verification the threshold of the person.

Dencun upgrades are already working on solving this problem, and some solutions (such as EIP-7514 increasing the Max Epoch Churn limit) will reduce the rate at which new validators join the network.

Market impact of Dencun upgrade

Dencun upgrade may affect the market value of the Ethereum network, mainly in the following aspects:

Network function enhancement: Dencun upgrade can Significantly increase Ethereum’s transaction processing capabilities and reduce costs, and attract more developers and users into the Ethereum ecosystem. Increased efficiency and adoption of the Ethereum network will likely drive demand for ETH and have a corresponding impact on its price.

Investor Perception: The successful deployment of Dencun can strengthen investor confidence in the long-term viability of Ethereum and its development team’s ability to execute complex upgrades. This perceived reliability and forward momentum may impact the attractiveness of Ethereum as an investment, which may lead to an increase in the value of Ethereum investments.

Market Hype and Sentiment: Cryptocurrency markets are highly sensitive to investor sentiment. Anticipating positive market reactions to the Dencun upgrade or its successful implementation could lead to short-term price fluctuations, with traders and investors adjusting their positions based on the expected impact on Ethereum’s functionality and market position.

With the successful activation of the Dencun upgrade on the Ethereum test network and its full implementation on the main network in March, Ethereum’s transaction processing capabilities and efficiency will be greatly improved. Overall, the Dencun upgrade is a huge evolution for Ethereum, solving immediate and long-term scalability, security, and efficiency issues.

The EIP in this upgrade, designed to optimize data availability and staking operations, can significantly enhance the performance and user experience of the network. The Dencun upgrade addresses pressing challenges facing blockchain networks by implementing Proto-Danksharding and introducing blobs, and is a milestone in Ethereum’s ongoing efforts to improve its scalability and reduce transaction costs.

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