Ethereum Dencun Upgrade Incoming: A Revolution That Will Change Gas Fees

Ethereum is undergoing a profound technological transformation. The upcoming Dencun upgrade is not just a routine system update but a systemic solution aimed at network scalability. As a key milestone in the Ethereum 2.0 roadmap, this upgrade, called Cancun-Deneb, will fundamentally change the experience for users and developers.

Dencun Upgrade: Why Everyone Is Paying Attention

The Ethereum Dencun upgrade (Cancun-Deneb) is scheduled to go live on the mainnet on March 13, 2024. The name derives from the brightest star in the constellation Cygnus, carrying the Ethereum team’s expectations for breakthroughs in network performance.

The core innovation of this upgrade lies in the EIP-4844 proposal, which introduces the concept of Proto-Danksharding. In simple terms, Proto-Danksharding introduces a new mechanism called “blobs” (data chunks), enabling the Ethereum network to more efficiently store and process large amounts of data, paving the way for full Danksharding in the future.

Proto-Danksharding and Blobs: A New Data Processing Approach

Proto-Danksharding is a phased solution that does not directly implement full Danksharding but prepares for it. The key innovation of EIP-4844 is the introduction of “blobs”—a special data packaging method.

Traditional Ethereum transactions store all data permanently on-chain. Blobs, however, adopt a different logic: data is stored temporarily rather than permanently. This means Layer-2 solutions (such as Arbitrum, Optimism, and Polygon) can submit transaction data to the mainnet at a lower cost.

The State Expiry feature also plays an important role in this upgrade. It automatically cleans up outdated and unused data in the network, helping reduce load and improve overall efficiency.

Other Major Technical Improvements

The Dencun upgrade involves more than just EIP-4844. Several other enhancements will be implemented:

EIP-1153 introduces transient storage operation codes, allowing smart contracts to use memory more efficiently during execution, expected to reduce gas costs and enhance network scalability.

EIP-4788 improves Ethereum’s consensus layer by introducing the Beacon Block Root mechanism, enabling the execution layer to access consensus layer information directly, increasing operational efficiency.

EIP-5656 adds the MCOPY operation code, making memory data copying during smart contract execution more efficient.

EIP-6493 fine-tunes the validator block selection mechanism, improving finality and reducing mining centralization.

EIP-6780 restricts the SELFDESTRUCT function in smart contracts, enhancing network security and stability.

Timeline of the Dencun Upgrade

The path to this upgrade has not been straightforward. Initially scheduled for Q4 2023, it was delayed during the All Core Developer Consensus meeting in November. The final timeline is as follows:

• January 17: Activation on Goerli testnet
• January 30: Activation on Sepolia testnet
• February 7: Activation on Holesky testnet
• March 13: Mainnet deployment

This postponement proved to be the right decision, providing ample time for testing and validation.

A New Future for Gas Fees: Breakthroughs in Data Availability

The most anticipated outcome of Dencun is a significant reduction in gas fees. However, the story is more complex than it appears.

EIP-4844 directly optimizes for cost reductions on Layer-2 networks. Fidelity data indicates that Layer-2 solutions currently account for about 10% of total Layer-1 costs. Post-upgrade, this ratio is expected to decrease substantially.

According to real-time data from L2fees, before the upgrade, costs vary greatly across chains: ETH transfers on Arbitrum cost about $0.24, Optimism $0.47, Polygon $0.78. Token swaps are even higher, at $0.67, $0.92, and $2.85 respectively. The Dencun upgrade is expected to reduce these fees by 10 to 100 times.

This improvement is due to blobs allowing Layer-2 to submit transaction data more cheaply, instead of using expensive calldata.

The Profound Impact of Data Availability Layer

Proto-Danksharding will create ripple effects across the entire data availability (DA) ecosystem. Specialized DA solutions like Celestia, EigenDA, and Avail will face new competitive environments—Ethereum now becomes a viable DA layer.

How this shift will unfold remains an open question. Some DA projects may seek new value propositions, while others might complement Ethereum. In any case, the cost structure of the entire ecosystem will be reshaped.

Opportunities Brought by Layer-2 Network Upgrades

The impact of Dencun on Layer-2 solutions is multi-faceted.

First is the cost revolution. With blobs, Layer-2 networks can submit data to Ethereum at lower costs, directly translating into reduced user costs.

Second is throughput enhancement. Improvements in the base layer’s processing efficiency mean Layer-2 can achieve faster confirmation times when finalizing transactions on the mainnet, reducing delays and improving user experience.

Third is security standardization. Dencun may introduce new security practices that will be adopted within Layer-2 networks. A more secure Layer-2 ecosystem means more stable transaction environments, indirectly reducing gas volatility.

The Qualitative Leap in Ethereum Performance

What will happen to Ethereum’s processing capacity after the upgrade? The data is straightforward:

Currently, Ethereum’s transaction throughput is about 15 TPS (transactions per second). After Dencun, combined with Proto-Danksharding, the network is expected to reach 1000 TPS. This is not a small incremental improvement but a leap of several orders of magnitude.

For users, this means faster transaction confirmations. For developers, it enables building more complex applications without worrying about network congestion.

New Opportunities for Developer Ecosystem

Dencun opens several new doors.

Blob capacity of 1MB offers developers new possibilities. It is sufficient to store large amounts of application data, making previously cost-prohibitive use cases feasible.

Imagine an application that requires frequent writing of large on-chain data—such as high-frequency trading systems or on-chain databases. Previously, such applications were impractical due to costs. Now, they become viable.

Enhanced smart contract execution efficiency is reflected through multiple EIPs. Improvements like EIP-1153, EIP-5656 mean the same functionality can be achieved with less gas. This reduces user costs and makes complex applications more economical.

New Life for ETH Liquidity Staking

Dencun may inject new vitality into the ETH liquid staking (Liquid Staking) market. As the network becomes more efficient and scalable, participating in staking while maintaining capital liquidity becomes more attractive.

This creates a positive feedback loop: more participants stake ETH, increasing network decentralization, and making the ecosystem healthier.

Key Position in the Ethereum 2.0 Roadmap

To understand the importance of Dencun, it’s essential to see the broader Ethereum upgrade landscape.

Beacon Chain (launched December 2020) introduced the Proof of Stake consensus layer, laying the groundwork for subsequent reforms.

The Merge (September 2022) was a historic milestone—Ethereum fully transitioned from proof-of-work to proof-of-stake, reducing energy consumption by over 99.5%.

Shanghai/Capella upgrade (April 2023) enabled stakers to withdraw rewards, encouraging broader participation.

Now is Dencun—a revolutionary data layer upgrade.

Future Electra + Prague (Petra) will introduce Verkle trees, further optimizing data storage structures.

The ultimate goal is full Danksharding—dividing Ethereum into multiple shards that can process transactions in parallel, achieving true linear scalability.

After Dencun: Full Implementation of Danksharding

Proto-Danksharding is a bridge toward full Danksharding. Complete Danksharding will split Ethereum into 64 or more shards, each handling transactions independently.

This is a game-changer. Instead of the entire network processing all transactions, multiple shards can work in parallel. Mathematically, this could increase throughput from the current 15 TPS to thousands of TPS.

The blobs and Proto-Danksharding in the Dencun upgrade lay the foundation for this ultimate goal. It is not the destination but a critical milestone on the journey.

Risks That Must Be Taken Seriously

Despite the promising prospects, there are real risks to consider.

Technical complexity means potential vulnerabilities. Although extensively tested and audited, large-scale system upgrades always carry unforeseen risks.

Compatibility issues may affect certain applications. Most should operate normally, but some edge cases might cause problems during transition. Different dApps and smart contracts may require adjustments.

Gas fee volatility could occur during the transition. New mechanisms need time for market understanding and adoption. During this period, fees might fluctuate temporarily.

The actual impact ultimately depends on how quickly developers and users adopt the upgrade. Rapid adoption amplifies positive effects; slow adoption means improvements will unfold gradually.

Significance for Traders and Investors

The Dencun upgrade represents a major turning point for the Ethereum ecosystem. For anyone operating within this ecosystem, understanding its implications is crucial.

In the short term, the upgrade may trigger market volatility—both optimistic about progress and cautious about uncertainties.

In the long run, a cheaper, faster, more scalable Ethereum creates value for all participants. Layer-2 applications will become cheaper, mainnet applications faster, and the overall ecosystem more attractive.

Broader Ecosystem Impact

The Dencun upgrade will not only affect Ethereum itself but also ripple across the entire crypto ecosystem.

Other L1 chains may face pressure to develop their own scalability solutions to stay competitive.

Liquidity might be redistributed as Layer-2 solutions become more attractive.

New application categories could emerge, as previously unfeasible use cases become economically viable.

Summary: The Evolution of Ethereum

The Dencun upgrade marks Ethereum’s evolution from a powerful but scalability-limited platform to a truly large-scale, usable blockchain network.

Through Proto-Danksharding, blobs, and numerous technical improvements, Ethereum is systematically addressing its biggest bottleneck. This is not a one-step fix but part of a carefully planned multi-phase strategy.

For traders, developers, and everyday users, Dencun offers a more efficient, cheaper, and faster Ethereum. For long-term investors, it further demonstrates the platform’s maturity—Ethereum not only has grand visions but also a clear technical roadmap and execution capability.

As the upgrade progresses, the crypto market may witness a redefinition. Not all changes will be immediately apparent, but in the months and years after Dencun, its effects will unfold gradually, laying the foundation for Ethereum’s next growth phase.