The Deep Impact of the Dencun Upgrade on the Ethereum Ecosystem: Looking into the Future from Proto-Danksharding

Ethereum is undergoing a significant technological iteration. The Cancun-Deneb upgrade, scheduled for March 13, 2024 (commonly referred to as Dencun), represents another breakthrough in scalability and efficiency for this world’s largest smart contract platform. The core innovation of this upgrade—the Proto-Danksharding introduced in the EIP-4844 proposal—how will it rewrite Ethereum’s performance bottlenecks? What practical impacts will it have on on-chain users, Layer-2 networks, and the developer ecosystem?

Core Innovation of the Dencun Upgrade: Understanding Proto-Danksharding

What is Proto-Danksharding?

EIP-4844 is the soul of the Dencun upgrade. This proposal introduces the concept of “blobs”—a new data transmission mechanism that allows Ethereum to store and process large amounts of transaction data more efficiently.

Unlike traditional calldata storage, blobs adopt a temporary storage strategy. These data chunks are automatically deleted after approximately 18 days in the network, significantly reducing data storage costs. For Layer-2 networks and data availability layers (such as Celestia, EigenDA, and Avail), this means a revolutionary cost reduction—transaction fees could decrease by 10 to 100 times.

Proto-Danksharding is just a transitional phase. It paves the way for the final full Danksharding (a complete network overhaul through sharding technology), which is a long-term goal in the Ethereum 2.0 roadmap.

The Two Dimensions of the Cancun-Deneb Upgrade

This upgrade unfolds along two key dimensions:

Execution Layer (Cancun) focuses on optimizing data availability by redesigning data processing workflows through the introduction of blob mechanisms.

Consensus Layer (Deneb) enhances the Beacon Chain’s functionality by anchoring block roots directly to the execution layer, strengthening coordination between the two layers.

Other EIP Proposals Advancing Alongside Dencun

In addition to EIP-4844, this upgrade includes several technical improvements:

Timeline: From Testing to Mainnet Deployment

Ethereum development team has laid out a clear phased release plan:

• January 17, 2024 – Activation on Goerli testnet
• January 30, 2024 – Activation on Sepolia testnet
• February 7, 2024 – Activation on Holesky testnet
• March 13, 2024 – Official mainnet launch

This gradual testing process allows the community to thoroughly verify stability while giving developers ample time to adapt to new mechanisms.

Revolutionary Impact of Dencun on Layer-2 Networks

Gas Fee Compression

Currently, typical transaction costs on mainstream L2 networks are:

• Arbitrum ETH transfer: $0.24
• Arbitrum token swap: $0.67
• Optimism ETH transfer: $0.47
• Optimism token swap: $0.92
• Polygon ETH transfer: $0.78
• Polygon token swap: $2.85

After Dencun activation, these figures are expected to drop by an order of magnitude. According to Fidelity reports, Layer-2 networks currently account for about 10% of total Ethereum gas fees. Post-upgrade, this proportion will shrink significantly, reflecting a substantial reduction in costs.

Cross-Layer Interaction Optimization

Proto-Danksharding improves coordination mechanisms between L2 solutions and the main chain. This means:

• Faster transaction finality: L2 can submit finality proofs to the main chain more quickly
• Further cost reductions: Cross-layer operations become more economically efficient
• Enhanced ecosystem activity: Lower costs encourage more users to build and interact on L2

Specific Impacts on Different Stakeholders

Changes for Ordinary Users

Transformative Transaction Fees

Before the upgrade, small transactions on L2 were already cheaper, but some use cases still faced friction. After Dencun, even tiny transactions will become extremely economical. This could unlock new application types—such as micro-payments, in-game microtransactions, and other scenarios previously unfeasible due to gas costs.

Ecosystem Explosion

Lower fee barriers mean developers can build applications that were previously “not economical.” Distributed social platforms, on-chain data services, real-time gaming—applications sensitive to latency and costs—will have new opportunities.

Opportunities for Developers

Expanded Data Storage Capacity

Each Ethereum block’s blob capacity will reach 1MB, with future scalability. Developers can store more data on-chain at a fraction of previous costs.

Freedom for Contract Innovation

Reduced gas costs eliminate many architectural constraints. Contracts previously optimized for cost-efficiency can now adopt more straightforward, auditable designs.

Broader Significance for the Ethereum Ecosystem

The upgrade is expected to increase Ethereum’s throughput from about 15 TPS to around 1000 TPS—though not the final form, it’s a qualitative leap. The long-term goal is a 100x to 1000x scalability increase.

New Opportunities in Liquid Staking

Dencun consolidates Ethereum’s position as a PoS network. Staked ETH yields remain relatively stable, and the upgrade’s success will further enhance network security and user confidence.

For liquid staking protocols (like Lido, Rocket Pool), this means users will be more motivated to stake while enjoying DeFi liquidity—a win-win scenario.

Technical Risks and Transition Challenges

Possible Technical Pitfalls

1. Underlying Implementation Complexity – Despite extensive testing, edge cases in complex systems may cause unexpected behaviors.
2. Client Compatibility – Different Ethereum clients may have subtle implementation differences, requiring close monitoring.

Ecosystem Adaptation Cycle

Initially, not all applications will immediately adopt new mechanisms. Large protocols need time to integrate, and smaller applications may face resource constraints. The actual reduction in gas fees will depend on how quickly the ecosystem responds.

Short-term Volatility Potential

During the adaptation phase, gas fees may experience temporary fluctuations. Users and developers should stay flexible and prepared for changes.

From Proto-Danksharding to Full Danksharding: Evolution Path

Dencun is just one step in a long-term strategy. Afterward, the Ethereum community plans to continue:

Next Stop: Electra/Prague (Petra) Upgrade

Future upgrades will focus on implementing Verkle trees—a new data structure that will further optimize data proofs and verification efficiency in the network. This prepares the path toward fully sharded Ethereum.

The Vision of Full Danksharding

True Danksharding will partition Ethereum into multiple independent data shards, each capable of processing transactions and smart contracts in parallel. This is a fundamental architectural upgrade and the core of Ethereum 2.0’s ultimate vision.

The entire transition from Proto to full sharding will span multiple upgrade cycles, reflecting the Ethereum team’s cautious yet determined engineering philosophy.

Historical Context and Significance of the Upgrade

The delay of the Dencun upgrade itself demonstrates Ethereum’s mature approach. Originally scheduled for Q4 2023, it was postponed because developers believed more thorough review was necessary during core developer consensus meetings. This cautious approach lays a solid foundation for a high-quality implementation.

In comparison, a review of Ethereum’s evolution:

• Beacon Chain (December 2020) introduced PoS concepts and laid the groundwork
• The Merge (September 2022) completed the historic consensus mechanism transition, reducing energy consumption by 99.5%
• Shanghai/Capella (April 2023) unlocked withdrawals of staked ETH, democratizing participation

Dencun represents the most “functional” step among these upgrades—directly addressing user concerns: costs.

Insights for Market Participants

From Traders’ Perspective

A smooth upgrade process may strengthen Ethereum’s technical narrative, supporting its long-term valuation. In the short term, successful activation could trigger positive technical reactions.

From Developers’ Perspective

This is a good time to enter the Ethereum ecosystem. Lower costs and improved development experience will attract more innovative projects.

From Investors’ Perspective

A more efficient network, a stronger user base, and a richer application ecosystem—these are key indicators of Ethereum’s long-term competitiveness.

Final Thoughts

The Dencun upgrade exemplifies Ethereum’s ongoing evolution as an open blockchain platform. It’s not just a technical upgrade but a new solution to the ancient scalability challenge.

From Proto-Danksharding to full sharding, from 15 TPS to 1000 TPS, and ultimately to a hundredfold and thousandfold increase—this is a clear and ambitious path. Each upgrade accumulates capability; every milestone lays the groundwork for the next.

For those working and investing within the Ethereum ecosystem, Dencun marks the beginning of a new era: costs are no longer a barrier, innovation can be freer, and applications more diverse. This is the true revolution—one that not only changes code but redefines the boundaries of possibility.