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On Wednesday morning, the Ethereum<\/a> blockchain<\/a> completed an upgrade called Dencun, the biggest change to the network\u2019s code in over a year. The upgrade is an important step to help the world\u2019s second most valuable blockchain overcome its scaling challenges, and reduce its infamous gas fees. But what exactly is Dencun and how does it work? Our plain English explainer tells all you need to know.<\/p>\n Dencun describes two upgrades that took place at the same time on Ethereum. The name combines the \u201cCancun\u201d upgrade of the execution layer and the \u201cDeneb\u201d upgrade on the consensus layer. The latter refers to how network users agree on the state of the blockchain, while the former refers to how transactions are processed.<\/p>\n In technical terms, the upgrade is the result of a new Ethereum Improvement Proposal (EIP) called \u201cproto-danksharding,\u201d or EIP-4844, which improves the blockchain\u2019s propensity to handle data from secondary networks.<\/p>\n Gathering of the five families in London for the Dencun upgrade pic.twitter.com\/4cyxFSQoVh<\/a><\/p>\n \u2014 David Mihal.eth (@dmihal) March 13, 2024<\/a><\/p><\/blockquote>\n <\/p>\n The upgrade will lower gas fees<\/a> for the growing number of networks built on top of Ethereum that are known as Layer 2 (L2) or \u201crollups.\u201d This is important since gas fees have historically soared whenever there is a surge of activity on the blockchain, making it unviable to use at a large scale. Roll-ups help address this by processing transactions separately, and then stamping them to the main Ethereum blockchain in batches.<\/p>\n While roll-ups have already made Ethereum more efficient, one issue that is that, post-compression, nodes processing transactions hold on to L2 data infinitely, requiring a greater volume of hardware as time goes on. This has meant that over 90% of the fees on rollups are used for this data storage.<\/p>\n The upgrade means L2 data will be added to the base Ethereum network via fleeting, more efficient \u201cblobs\u201d rather than data held indefinitely. Instead, \u201cblob data\u201d will be stored for 18 days.<\/p>\n The overall effect should be lower costs, but users on the main blockchain (L1) won\u2019t enjoy these lower fees until at least 2026-27, says Pitchbook\u2019s crypto analyst Robert Le, until there is \u201cfull danksharding,\u201d referring to a rollup scaling method which provides extra storage for increased transactional capacity. <\/p>\n \u201cOver the next couple of years, you\u2019ll see less and less individual users, whether retail or businesses, transact directly on Ethereum. More will move to L2s and the only ones transacting on Ethereum will be the rollups,\u201d he said.<\/p>\n EIP-4844 marks the beginning of the \u201cSurge\u201d phase for Ethereum, outlined by the network\u2019s co-founder Vitalik Buterin in December. The aim of this phase is to reach 100,000 transactions per second.\u00a0<\/p>\n Gas fees had risen to an average of 98 gwei (a denomination worth one-billionth of an Ether, the native cryptocurrency for the Ethereum blockchain) the week before the upgrade, a level not seen since early May 2023, according to Ethercan data. A swap would cost users $87.45 in gas fees on average, while nonfungible token (NFT) sales average $147 in gas.<\/p>\n After the Ethereum Dencun upgrade this week, EIP-4844 will reduce L2 gas fees. According to IntoTheBlock statistics, for a DEX swap, the gas fee for Aribitrum will be reduced from $2.02 to $0.4, Optimism will be reduced from $1.42 to $0.28, Base will be reduced from $0.58 to\u2026 pic.twitter.com\/0x6jGDYF5z<\/a><\/p>\n\nWhat is the Dencun upgrade?<\/h2>\n
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Why did Dencun come about in the first place?<\/h2>\n
What about the main Ethereum network?<\/h2>\n
How much will Dencun lower fees?<\/h2>\n
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