What is the Dencun upgrade? Here’s what it means for Ethereum

Not to be outshined by Bitcoin’s halving event in April, Ethereum developers have another massive upgrade slated for next month.

Called Dencun, the upcoming fork is expected to cut costs for users on various layer-2 networks, specifically rollup platforms like Arbitrum, Base, zkSync, and Scroll.

After successful runs on various Ethereum testnets — technical sandboxes that replicate the $418 billion network — Ethereum developer Tim Beiko reported that Dencun will go live on March 13.

This upgrade — like last year’s Shapella and the previous year’s Merge upgrades — is essentially a bundle of small changes suggested and discussed by core Ethereum developers. These changes are called “Ethereum Improvement Proposals,” or EIPs for short.

Dencun will include nine different EIPs. For users, the most important one is EIP-4844.

That’s because this specific change is expected to dramatically cut the costs of interacting on layer-2 networks. Specifically, this EIP will lower the cost for layer 2s to post batches of transactions to Ethereum.

“Dencun is an exciting upgrade for the Ethereum ecosystem as it will drive the costs of using the network down across the board for all rollups,” Matter Labs engineer Anthony Rose told DL News.

“This means less cost-friction and, hopefully, more usage.”

Matter Labs develops and maintains zkSync.

Rollups batch transactions — leverage trades, simple swaps, or loans —into much smaller pieces of data. This data, which is proof that all those transactions did indeed happen, is then sent to Ethereum.

Less data means less congestion and lower gas costs on Ethereum.

But as activity has moved off Ethereum, rollups are also facing higher fees amid higher user activity.

“Overall, EIP-4844 increases the capacity of all Ethereum L2s, reducing fees and scaling up the throughput of the entire ecosystem,” Roberto Bayardo, a software engineer at Base, told DL News.

“Our contributions here will reduce transaction fees on Base from double-digit to single-digit cents.”

Scroll users should also see a marked drop in costs after the upgrade and data compression, Scroll researcher Toghurl Maharramov told DL News.

Dropping costs will open a plethora of new use cases only possible when costs have fallen to pennies. Bayardo pointed to onchain order book exchanges and gaming as a few examples, as well as marrying machine learning with crypto apps.

“Use cases that were previously impractical due to cost may become practical, David Dennis, Offchain Labs’ product marketing lead, told DL News.

Offchain Labs is the development firm behind Arbitrum.

“This could include new growth in onchain gaming, generative art, AI, or new surprises.”

New use cases mean more potential hazards, though, suggests Maharramov.

“The main risks that we’re aware of are the introduction of new primitives to the protocol and, as the result, bugs that can arise from those primitives.”

What’s next for Ethereum after Dencun?

Like upgrades before it, Dencun also sets the stage for further development, specifically, continued scalability.

EIP-4844 ushers in Ethereum’s “Surge” phase, as specified by an updated network roadmap from Vitalik Buterin.

The end goal during this phase is to hit 100,000 transactions per second.

Then “Scourge,” essentially avoiding centralisation and pesky MEV risks as rollups become the dominant scaling choice.

The “Verge” and “Purge” phases seek to make it even easier to verify all the data on Ethereum and eliminate any superfluous code written amid all the changes.

And finally, the Canadian-Russian programmer introduced the “Splurge.”

The goal here?

“Fix everything else.”

Liam Kelly is DL News’ Berlin correspondent. Contact him at liam@dlnews.com.