Explanation and analysis of the Ethereum update “Dencun” 4 months after its implementation
Before the update called “Dencun”, Layer 2 already played a significant role within the ecosystem. However, after the introduction of this famous update, the explosion of Layer 2 has reached previously unthinkable levels, making them indispensable elements for the expansion and efficiency of the entire ecosystem. Today we focus on analyzing the practical effects of this update, approximately four months after its official release. This period allows us to examine a significant amount of data and evaluate the actual success or failure of the update.
What is Dencun
The “Dencun” update on Ethereum, released on March 13, 2024, combines the “Cancun” proposals for the execution layer (Execution Layer) and “Deneb” for the consensus layer (Consensus Layer). This update introduces a series of Ethereum Improvement Proposals (EIPs) designed to improve different aspects of the Ethereum network. Among these, EIP-4844, also called Proto-Danksharding, is particularly significant for the scalability of Layer 2, thanks to the creation of Blobs that increase the possibility of managing data within the network. How?
Without getting too technical, we can think of “blobs” as data packets (256 KB) that represent a series of transactions that occurred on a layer 2. These packets are then packaged and subsequently sent to the Ethereum network for validation. I show you a graphic example thanks to txcity.io.
What we see here is a representation of two blockchains: Ethereum on the left and Arbitrum on the right (Dencun’s updated network), where each moving person represents a transaction.
Let’s focus on the right side, which represents the Arbitrum blockchain, one of the main Layer 2 of Ethereum. As you can see, all the people who use this blockchain leave a piece of paper on the counter before getting on the conveyor belt that represents the Arbitrum blockchain. This slip represents the receipt of a transaction that took place within Arbitrum. Because Arbitrum uses a mechanism called Optimistic Rollup, it initially accepts all transactions as valid, based on the assumption that they are honest. Subsequently, the transactions are made available for everyone to review and, if necessary, dispute within a certain period of time.
Once a certain number of transactions has been reached, as shown in the video, the “postman” collects all the transactions by spinning around to create what we have defined as a “blob”. Subsequently, if we observe carefully, the moment the postman starts directing towards the arrow indicating the direction of Ethereum, we see the image of the postman also appear on the left side of the screen, which represents the Ethereum blockchain. Here, the postman holds his blob, i.e. a packet of transactions that occurred on layer 2, and enters an Ethereum “bus”, which symbolizes a block of the main blockchain.
As illustrated in the video, this process happens just as easily as a “normal” transaction. In fact, there is no difference between the postman and one of the many people who board the buses represented by Ethereum blocks. The distinction is that the postman brings with him a series of transactions, while other people represent single transactions native to the Ethereum network.
Thanks to this “simple” process of creating the Blobs, the commissions on the various Layer 2 have been reduced by over 90%, thus allowing almost free operation within these blockchains with the consequent explosion of volumes within all the main layers 2.
We will now examine, through on-chain data, the improvements brought by this update.
Average cost of transactions on the main layer 2
Much of our discussion today could be summarized by looking at this graph representing the average transaction costs that occurred before and after implementing Dencun.
Looking at the graph, it is clear that starting from March 13th, the average cost of a transaction on Layer 2 such as Arbitrum, Optimism or ZkSync has suffered an instant collapse in commissions, going from values around $0.50 to values close to 0.
What is sensational is observing how, despite some moments of euphoria highlighted by the spike in transaction costs on the graph in the Base blockchain, all the other main Layer 2s managed to maintain stability, with transaction costs close to 0 and without suffering block congestion problems typical of blockchains such as Solana.
Users active on blockchains
The reduction in transaction costs has opened doors to a wide range of individuals, allowing them to enter the industry even with more modest investments. This unleashed a wave of activity on all the main Layer 2s, generating a real operational boom.
Another indicator that confirms the trend towards more intense activity within the main Layer 2 is certainly the number of transactions verified on the blockchain.
As can be clearly seen from the image above, it is clear that, with the exception of zkSync, the other Layer 2s have recorded a notable increase in the number of transactions, thus leading to a significant explosion in volumes, with particular importance in the cases of Base all beginning of April and Arbitrum at the end of May.
Average blob count per block
The graph offers a detailed view of the operational state of the blockchain network, highlighting the number of “blobs” contained in each ether block. The target and limit lines represent the ideal and maximum values supported by the network itself. These parameters are crucial to optimize the overall efficiency of the blockchain and to avoid excessive overheads. Actively monitoring the number of “blobs” per block is critical to ensuring that the network can handle the transaction load effectively, while maintaining its stability and performance. Therefore, this data remains essential to keep operators informed about the health of the network.
Conclusions
Undoubtedly, this update has brought a significant reduction in transaction costs, maintaining its effectiveness despite the increase in volumes recorded on the main Layer 2.
As highlighted by Vitalik Buterin in his article “Layer 2s as cultural extensions of Ethereum”, Layer 2s have become an essential part of the blockchain landscape and will continue to grow in importance. This is due to the increasingly widespread integration within the infrastructure, which makes its use increasingly essential for the Ethereum ecosystem.
I would like to conclude with an excerpt from the mentioned article, in which Vitalik answers the question of how this culture focused on Layer 2 development can be successful. His response, in my opinion, is extremely fascinating and reflects the authentic and fundamental spirit that guides the community of developers and DeFi enthusiasts, the real one.
The core value proposition of this layer-2 centric approach to culture is that it tries to balance the benefits of pluralism and cooperation, by creating a diverse set of different subcultures that still share some common values and work together on key common infrastructure to achieve those values.
Useful links:
- Dencun Mainnet Announcement Ethereum Foundation
- Vitalik Buterin post “Ethereum has blobs. Where do we go from here?”
That’s all for today too, in addition to remembering that in case of any type of doubt regarding the explanation I will be more than happy to read and respond to your comments, I remind you that you can also find me on x as @Filippo_Pozzi_ or by clicking here.
Greetings from Filippo, see you next time!
