Ethereum: The Dencun Discussion

Introduction

On March 13, we observed the launch of the much anticipated Dencun Upgrade (Cancun-Deneb), which was slated to greatly decrease gas fees across the board. And that, it certainly did. The gas fees on major L2 plummeted to near-zero levels.

Ethereum Roadmap

The famous Ethereum roadmap, a long term vision of where this grand project is actually heading has always been a point of reference when discussing any Ethereum upgrade. A quick re-cap:

The Merge: This was the transition of Ethereum from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism, significantly reducing the network's energy consumption. The Merge marked a pivotal shift in Ethereum's architecture​​.

The Surge: This phase aims to significantly increase Ethereum's scalability and transaction throughput via sharding and improvements in data handling. The Surge involves enhancements such as proto-danksharding, which makes the network more efficient in processing transactions and scaling up to handle more activities​​.

The Scourge: The focus here is on ensuring the decentralisation and security of Ethereum's transaction inclusion process, addressing the issues around Maximal Extractable Value (MEV) and proposing solutions to minimise its impact on network fairness and security​​.

The Verge: This phase is centred on improving Ethereum's efficiency and accessibility by implementing Verkle trees and SNARK proofs. These technologies aim to streamline block verification, making the network more scalable and user-friendly​​.

The Purge: Aiming to simplify the Ethereum network by reducing its historical data and thereby lowering the costs of operation and participation. This involves measures like EIP-4444, which proposes pruning data older than one year to lighten the load on the network​​.

The Splurge: This component is more about fine-tuning and optimising the network following the major upgrades in the previous phases. It focuses on ensuring that the network runs smoothly and efficiently after significant changes have been implemented​​.

While working towards different parts of the roadmap is more of a concurrent process and not a linear one, the Dencun Upgrade kicks off the Surge, with EIP-4844.

We will be going through the entire update on a per EIP basis to get a quick understanding of changes, with a special focus on the Surge-enabling proto-danksharding.

EIPs (Ethereum Improvement Proposals) are documents proposing new features or changes to the Ethereum blockchain, released periodically to guide the network's updates and improvements.

EIP - 4844: Proto-danksharding

Proto-danksharding is arguably one of the most awaited additions to Ethereum since the Merge on September 15, 2022. This development is part of Ethereum's broader objective to enhance scalability and reduce gas prices, which have consistently restricted the adaptability of the larger Ethereum ecosystem.

For effective scaling, it is crucial that every node in the Ethereum network downloads and processes every single transaction. The necessity for numerous nodes, each maintaining a copy of Ethereum data, is vital to decentralisation, since it forms the essence of the entire crypto industry.

Balancing scalability while maintaining the feasibility for each validator to run nodes presents a significant challenge. This has led to various solutions, one of which is a fundamental concept in computer science known as sharding. At its core, sharding involves dividing a database into smaller, more manageable databases for easier processing. In the context of Ethereum, this refers to blockchains and mini-blockchains running parallel to the main Ethereum network, the Beacon chain.

However, in this iteration, there is not much actual "sharding" occurring. Thanks to the efforts of Dankrad Feist, a much more simplified implementation was conceived, distinct from traditional sharding. This approach involves a unique entity known as the Binary Large Object, affectionately referred to as “Blob”. This implementation is known as Danksharding.

Before we get ahead of ourselves, let's look at the current reality to know where Blobs fit in. Currently, our solutions to scalability are Layer 2s such as Arbitrum and Optimism. As an entirely different chain, built on top of Ethereum - L2s greatly increase transaction speeds while deriving their security from Ethereum, since Ethereum still validates the transactions (assuming the consensus role). Rollups will carry the greater load of providing scalability to Ethereum, as we look towards a Rollup-centric future.

Earlier, we discussed how Ethereum transaction data must be present on all its nodes. This persistent data, known as Calldata, is expensive to store because its presence on nodes is permanent. Currently, rollups utilise Calldata for their operations. However, Blobs introduce a new form of persistent data with an expiration date.

Implementing Danksharding to its fullest extent demands significant complex work and multiple updates. To establish a simpler, working prototype, in a quicker time frame, developer ProtoLambda showcased a practical approach - Proto-danksharding.

This novel method introduced a new transaction type called Blob-carrying transactions. Alongside regular Ethereum transaction blocks, some blocks will carry a "motorcycle side-car" - the Blob.

The genius behind Blobs lies in their design, which allows individual nodes to perform minimal work to verify data availability. Unlike the conventional method of downloading all transaction Calldata, Blobs provide a quicker and more straightforward solution.

Blobs are designed to delete themselves after a certain timeframe which decreases the storage overhead. Blobs also remain inaccessible to the Execution Layer (EL)/EVM, which means they are not executed on the EVM and do not affect the state of the blockchain directly. Therefore Blob data is smaller, temporary and much cheaper.

The efficiency of Blobs has led to reduced gas prices on Layer 2s. Consequently, this leads to rollups being supercharged, since they are no longer bogged down by expensive transaction fees.

Since Blobs do not interact with the Execution side, they will have their own separate fee market. Therefore, even if Layer 1 experiences congestion and high gas fees, Blob prices will remain stable.

In summary, Blobs represent a new, smaller, temporary, and more cost-effective form of persistent data. They come with their own transaction type and fee market. The introduction of Blobs offers rollups an improved method for data verification, contributing to lower gas prices on Layer 2s, an effect that is currently underway.

Proto-danksharding is already a game changer, but is still an early version of the complete implementation of dank-sharding, when the blob sizes will become bigger. There is a lot to look forward to when full fledged dank-sharding is implemented.

EIP-1153: Transient Storage

A developer favourite, EIP-1153 achieves a major development with considerably lesser effort. By introducing the concept of Transient storage, it creates much cleaner smart contract designs, saves gas fees and significantly simplifies EVM design. These words are right out of dev mouths, and this EIP even has its own fanpage!

In the current system, regular storage is used for transient use, leading to unnecessary writes on permanent EVM storage - and expensive gas spent. Transient storage on the other hand is cleared after each transaction. Basically, it's like RAM, cleared when not needed anymore.

EIP-4788: Beacon Block Root in the EVM

During the Merge, the Ethereum Mainnet was merged with the Beacon chain, ushering Ethereum to an era of Proof of Stake transactions. However, we should note that behind the scenes, these two chains are coupled 1:1, yet separate. The Ethereum Mainnet works as the Execution Layer (EL) and the Beacon chain works as the Consensus Layer (CL). The EL processes the transactions and broadcasts them, and the CL handles the PoS part, verifying the transaction with validators.

With this separation, there are issues regarding how these layers communicate. A lack of built-in communication requires the need for trusted oracle services. For example, for a Liquid Staking provider, oracles are needed to update the daily earnings for users. EIP-4788 eliminates the need for such oracles by making the consensus state available to the EVM, and hence all contracts and providers.

EIP-4788 uses a method in which the parent Beacon Block is forced to be present on the corresponding EL block’s header. This creates an in-built oracle by which the consensus state is available to the EL, without relying on another oracle solution.

This ingenious solution creates a more secure environment as trust is minimised and no external oracle needs to be paid. This increases efficiency for Liquid Staking and Re-staking, the biggest protocols of our time.

EIP-5656: MCOPY

This one is a straightforward addition of a new opcode. Memory copying involves moving data from one location to another. The current provisions for this process are not efficient.

MCOPY combines the MSTORE and MLOAD opcodes to create a more efficient method. This is just an add-on feature, but it significantly reduces gas consumption.

EIP-6780: SELFDESTRUCT only in same transaction

This EIP limits the usage of SELFDESTRUCT, an older and controversial opcode designed for cleaning up old code. Its functionality, however, has been erratic, which opened doors for hackers to exploit its implementation. Moreover, the upcoming introduction of Verge (Verkle trees), renders the current implementation of this opcode impossible.

Instead of being removed entirely, the use of this opcode is now restricted; it can only be called within the same transaction that created the contract.

In summary, this EIP mitigates risks of malicious attacks and enhances smart contract security by constraining an outdated opcode. It also facilitates future developments.

EIP-7044: Perpetually Valid Signed Voluntary Exits

The goal of this EIP is to empower stakers by simplifying the process of exiting a stake. Typically, a non-custodial validator handles all staking operations using a signing key, while the staker possesses the withdrawal key to prove ownership.

Currently, if a staker decides to leave, the validator's cooperation is needed to use the signing key for the exit process. Although it's rare, there's a chance a validator might refuse to assist. To circumvent this potential issue, Pre-signed Voluntary Exits were introduced, enabling stakers to independently manage their exit. Originally, these voluntary exits were only valid for the duration of the current and previous blockchain forks. EIP-7044 now proposes to extend the validity of these exits indefinitely, ensuring stakers have lasting control over their exit process.

EIP-7045: Increase Max Attestation Inclusion Slot

The purpose of this EIP is to decrease confirmation times. Each Ethereum Epoch consists of 32 slots, where validators are required to attest to blocks. This EIP permits validator attestation over two rolling epochs, effectively providing validators with 64 slots for attestation.

This process is necessary because the underlying algorithms depend on the validators' attestations, and increasing the number of attestations accelerates the confirmation process. Although the actual details are much more complex, the essence is that it reduces block confirmation times and decreases latency for users.

EIP-7514: Add Max Epoch Churn Limit

Ethereum has a certain churn rate. Churn rate being the number of validators that can be added per epoch. This metric increases with the increase in the number of validators and vice-versa. This EIP manages this influx, capping it at 8 and eliminating any variability.

This may sound counterintuitive, since more validators equals more ETH, which leads to greater security as per PoS consensus. However, the constantly increasing number of validators can pose challenges in the future, especially when implementing Single Slot Finality.

Single Slot Finality(SSF) aims to drastically reduce time to finality - basically finalising an Ethereum block, which is currently 15 minutes.

The community has hence decided to slow the influx of validators, which will give them time to work on SSF - which is impractical at larger validator sets.

This EIP is hence more of a cautionary measure for now to make sure the parts are functioning well before taking on a greater load.

EIP-7516: BLOBBASEFEE opcode

We mentioned earlier in EIP-4844 that Blobs offer a new form of persistent storage, with their own fee market. This EIP proposes the BLOBBASEFEE opcode, to be utilised by Rollups and L2s to query the current blob-base fee.

Goodbye Goerli

The Dencun Upgrade also marks the end of the lifecycle for the Goerli testnet. As Ethereum’s first multi-client testnet Goerli was monumental in Ethereum’s development. With the launch of Dencun on March 13, 2024, Goerli officially shuts down on April 13, 2024.

This marks the shift, when developers are now advised to move to Sepolia, which is the current default testnet for smart contract development. Holesky meanwhile will be the infrastructure and protocol-developer testnet.

Conclusion

This was another episode of the Ethereum ecosystem, pushing some really interesting updates, and carving the path ahead for all of us. While we read the theory, it is exciting to see the practical reflection, the gas prices falling. The far-reaching consequences are even more exciting, since a lower gas fee makes the network much more accessible. Opening doors to decentralised finance for more people and creating opportunities for more interesting implementations of Ethereum. Vitalik, with Dencun, has already signed a focus on L2 DApps and solutions, and this marks the unfolding of a new phase.

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