What is the Dencun Upgrade of Ethereum? Date, Details, Effects and More

Key Highlights

• Ethereum (ETH) price recently increased by 17.72% due to the anticipation of the upcoming Dencun upgrade.

• Dencun upgrade combines Deneb and Cancun upgrades.

• The Goerli testnet (test network) launch date of the Dencun upgrade is January 17, 2024, followed by testing on the Sepolia and Holesky test nets in late January and early February.

• The nine EIPs improvements of Dencun upgrade are- EIP-1153, EIP- 4788, EIP-4844, EIP-5656, EIP-6780, EIP-7044, EIP-7045, EIP-7514, and EIP-7516.

• EIP-4844 is the most crucial EIP implementation in the Dencun upgrade. It will introduce Proto-Danksharding to reduce rollup fees significantly and enhance network scalability.

Ethereum has surged 17.72% in the last seven days, including a 10.30% increase in just one day on January 11 2024. Such an impressive price surge in the biggest altcoin often acts as the harbinger of a new Ethereum upgrade. It is no exception this time, as the recent price surge has come days before the expected date on which Ethereum's Dencun upgrade will go on the Goerli testnet. Since Ethereum price surges are highly related to its upgrades, it is a wise habit to know everything about these upgrades.

So, let's do exactly that.

Let's also explore the answers to the most burning questions about the Ethereum Dencun Upgrade: What is the Dencun upgrade? More importantly, how will the Dencun upgrade affect the ETH price?

What is Ethereum's Dencun Upgrade?

Dencun upgrade is a blended name for Deneb and Cancun upgrades in the Ethereum blockchain. While the improvements in the consensus layer of the Ethereum blockchain fall under the Deneb, the execution layer improvements will fall under the Cancun. There will be nine EIP (Ethereum Improvement Protocols) implementations in the Dencun upgrade. It includes EIP-1153, EIP- 4788, EIP-4844, EIP-5656, EIP-6780, EIP-7044, EIP-7045, EIP-7514, and EIP-7516.

The most anticipated EIP upgrade is the EIP-4844, which will introduce Proto-Danksharding in the Ethereum system. As per multiple sources, it will bring transformational betterment to the Ethereum network by significantly slashing rollup fees. (more details below)

Dencun upgrade is the next step after the Shapella Upgrade of Ethereum that took place on April 12, 2023, and allowed the partial and complete withdrawal of staked ETH locked in the Ethereum smart contract since 2020.

While the Shapella upgrade was part of the Merge era, the Dencun upgrade will be the beginning of the Surge era in the Ethereum roadmap. It will focus on integrating innovative scaling solutions like L2 rollups and dank sharding in the Ethereum network to lower gas fees and increase processing capacity.

Ethereum co-founder Vitalik Buterin also expressed his excitement for the Dencun upgrade, stating that the 2024 roadmap of Ethereum sets a clear path for the evolution and future of the Ethereum network.

Ethereum Dencun Upgrade Date

The Ethereum developers have decided on January 17, 2024, as the Dencun upgrade date for its Goerli testnet.

Goerli Testnet is the replica of the Ethereum mainnet. The Ethereum developers created it for Ethereum 2.0 to test the new upgrades before implementing them into the original Ethereum blockchain. Goerli testnet uses a test cryptocurrency called Goerli ETH, which has no real value. Its purpose is to give a testing environment for Ethereum developers for new features and experiments.

Earlier, this Goerli testnet launch of the Dencun upgrade was about to take place in the last quarter of 2023. However, the developers postponed it to January 17 due to technical complications.

Once the Dencun testing is successful in the Goerli testnet, the Ethereum developers plan to launch it on the Sepolia testnet on January 31, 2024.

Sepolia is another important testnet of Ethereum core developed in October 2021. It mimics the harsh network conditions of the Ethereum mainnet environment for the new upgrades. It has a shorter block time for faster transaction confirmation and an uncapped total supply of testnet tokens.

The Holesky testnet launch for the Dencun upgrade will also occur on February 7, 2024. Holesky is the public testnet of Ethereum. The developers created it to do stake trials, infrastructure assessments, and protocol testing with precision. If things go well in these three upgrades, Ethereum developers will move forward with their plan to launch the Dencun upgrade in the Ethereum mainnet.

It is important to note that the above Ethereum Dencun upgrade dates are flexible and can change if the developers find major issues come up before the launch.

Ethereum Dencun Upgrade EIP Details

There are nine major Ethereum Improvement Protocols (EIPs) that the Dencun Upgrade will have.

Let's understand them one by one.

EIP-1153

It will add two new instructions (opcodes) of TLOAD and TSTORE to the EVM (Ethereum Virtual Machine) that will automatically self-erase after each transaction ends. This step can make the gas fee usage more efficient for Ethereum.

EVM data storage in Ethereum significantly affects the gas cost of processing a transaction request. Storing data in its permanent storage space is more expensive than storing data in the EVM memory, which is a temporary storage space. Utilizing this information to reduce the cost of storing data, EIP-1153 proposes to create a third type of storage in the EVM, which will be neither permanent storage nor memory.

Instead, it will be a "transient storage" that will erase itself like the RAM of computers when the system no longer requires it. It is a medium-term memory that Ethereum nodes can access without needing to store it in the permanent storage of the EVM. Transient storage will be much cheaper to use than regular Ethereum storage. It will have two key opcodes (operation codes)- TLOAD and TSTORE. While TLOAD will load the data from transient storage, the TSTORE will help store the data in the transient storage. The gas cost will be nearly 100 GAS each, which is significantly cheaper than the existing EVM storage operations.

EIP- 4788

It will integrate a "Beacon Block Root" into all the EVM blocks to better align EVM and the Beacon chain.

After the Merge upgrade, the execution layer (EL) and consensus layer (CL) converged to create a single blockchain. While the EL processes transactions, CL executes the proof of stake consensus algorithm. Since the Merge upgrade, communication between CL and EL has occurred through an intermediate component called Engine API.

However, the EIP-4788 will introduce a big change in the process by inserting the parent beacon block root into each EL. This beacon block root is a cryptographic accumulator (an accumulator is like a digital container that keeps track of certain values or elements) that will have real-time proof of a consensus state. It will help the Ethereum clients derive the consensus layer state directly into the blocks of the execution layer. Once this EIP merges with the Ethereum network, Smart contracts and protocols will not require a trusted intermediate solution to get an update about Ethereum's consensus state.

EIP- 4844

This proposal will introduce the concept of proto-dank sharding with temporary data units called blobs attached to existing Ethereum blocks. It will lower gas fees and provide cost effective data storage for layer-2 rollups.

To understand proto-dank sharding, let’s understand sharding and dank sharding first.

Sharding is a blockchain scaling method that divides the network into smaller units called "shards". Each shard processes transactions independently, so the blockchain can process multiple transactions simultaneously.

Danksharding is similar to sharding but adds Binary Large Objects (blobs) to increase the transaction throughput further and reduce the transaction cost. These blobs are like giant, cheap data bundles with a header and body. The body contains the data; the head includes the signature. These blobs are only temporarily available. They are also larger in size (<128 kb) but cheap compared to the current alternative used by Ethereum.

The EIP-4844 integration will introduce new transactions involving these blobs. The information in these blobs will get automatically deleted after a fixed time (1-3 months) without accessing the EVM. It will help the L2 rollups associated with Ethereum to transmit data to the Ethereum blockchain at a reduced cost, decreasing the transaction fee for the end user.

Proto-Danksharding is the transition phase of Ethereum towards a complete Danksharding from sharding. EIP- 4844 will introduce new "blob-carrying transactions" in the Ethereum network to prepare it for the eventual shift to full Danksharding in the upcoming upgrades. As the data blobs will reduce the data storing cost for Ethereum rollups and will delete automatically, they can drastically reduce the network cost for the end users. DankSharding can enhance the transaction speed of Ethereum to 100,000 TPS.

EIP-5656

This EIP will roll out a new EVM copy code, MCOPY, to establish a cost-effective and simple method for copying memory.

Under this implementation, a new EVM operation code, MCOPY, will come into effect. This new code instruction will effectively enhance how data moves into the EVM. For instance, copying 256 bytes of memory in EVM using MCOPY will cost 27 gas, while the existing methods currently charge 96 gas. The more cost-effective EVM becomes, the more it will benefit the end users as they spend gas.

EIP-6780

EIP-6780 will update the SELFDESTRUCT opcode.

SELFDESTRUCT is a pre-installed keyword function in the EVM. Ethereum Smart contract creators use it to clean and remove unrequired codes, contracts and funds from Ethereum. However, most Ethereum developers now think that SELFDESTRUCT is a bug instead of a feature. The reason is that SELFDESTRUCT makes it easier for bad actors to execute rug pulls by allowing them to remove smart contracts and funds from EVM anytime. The bad actors can use it to direct funds to their own wallets and vanish in thin air. There have been multiple instances when ERC-20 tokens got lost due to it.

That's why the EIP-6780 proposal modifies the functionality of the SELFDESTRUCT opcode. Currently, when SELFDESTRUCT deletes a contract, it sends the Ether (ETH) remaining in that Smart contract to a specific address. But after EIP-6780, only if any program includes SELFDESTRUCT right when it is created, the SELFDESTRUCT will work like it usually works. It will send money and delete the program. However, if the program would not include SELFDESTRUCT right during its creation and first transaction, it will only send money to a specified address but will not delete the program.

The key goal of this change is to enhance the security of Smart contracts in the Ethereum ecosystem by making it more challenging to execute illicit attacks using SELFDESTRUCT. Only the contracts created after the rollout of EIP-6780 will work according to the revised functionality of SELFDESTRUCT.

EIP-7044

This EIP will allow perpetually valid Signed Voluntary Exits for Ethereum validators.

Currently, the delegating staking arrangement in Ethereum involves two parties- the person staking ETH (>32 ETH) and the validator operator to handle the technical aspect of running the Ethereum validator node. When an ETH staker decides to exit from their staking program and withdraw their deposited ETH and the earned staking rewards, their validator operators must sign a "voluntary exit message (VEM).

Currently, the validator operators pre-sign these voluntary exists for the validators they operate for. They send these pre-signed messages to the ETH stakers, locking their ETH with that validator. It empowers the ETH staker to voluntarily exit without waiting for the VEM.

However, these pre-signed validator messages have some limitations, making them valid only till the Deneb upgrade occurs. The EIP-7044 upgrade will make these voluntary exits perpetually valid instead of only being valid for some versions.

It will provide additional fund security to Ethereum stakers and improve the overall staking experience on the Ethereum blockchain.

EIP-7045

EIP-7045 will increase the maximum time for attestation (giving a vote on a block to signal its correctness).

As we all know, the Ethereum blockchain comprises a series of blocks. Each block has several attestations given by the Ethereum validators. These attestations are nothing but a vote on a block that signals the "correctness" of that block. The attestations by validators act as their positive vote in favour of the blockchain's overall correctness. Every validator needs to create, sign and broadcast an attestation in every epoch. Here, an epoch is the time unit in Ethereum, which equals 6.4 minutes. Each Ethereum epoch has 32 slots, where each slot means 12 seconds.

Currently, the attestation slot (time) for enrolling attestations in Ethereum is one epoch or 6.4 minutes. The EIP-7045 will extend this time limit to 2 epochs, meaning the validators will get 12.8 minutes to include attestations. According to Ethereum developers, this change will help Ethereum maintain consensus and promptly process transactions.

EIP-7514

It will cap the per-epoch churn limit to maintain good network health.

Let's understand the churn limit first.

The churn limit is the number of active Ethereum validators required to exit or enter the network within a specific period of 1 epoch, which equals 6.4 minutes.

Currently, this churn limit has a minimum value of 4 and for every new 65,536 additional active validators on the Ethereum network, the churn limit increases by one. It means that for every new 65,536 active validator, the number of validator exits and entries that can be processed per epoch also increases by one.

However, EIP-7514 will implement a churn limit of 8 per epoch. If the number of new validators willing to join the active validator set (a group of validators that directly participate in the consensus of the blockchain) of Ethereum exceeds the churn limit of 8, these validators will have to wait in a first-come-first-serve activation queue to be chosen and activated.

It is important because having too many active validators places additional stress on each network node as they have to keep track of these validators. It will also slow down the rate of new ETH issuance as limited validators will be able to contribute to network security and claim rewards.

EIP-7516

This last Dencun upgrade EIP will introduce a new opcode, BLOBBASEFEE (blob-base-fee), in the Ethereum to provide the value of the blob gas fee of the current executing block to smart contracts.

In reference to Ethereum, the base fee is the minimum required to process and include a transaction in a block. EVM Smart contracts need to know this base fee for performing certain actions programmed in them. To make it happen, an opcode, BASEFEE, was integrated into Ethereum that would do the work to give Smart contracts the value of base fees for various purposes.

Since the Dencun upgrade involves proto-dank sharding and the introduction of Blob-carrying transactions, the new opcode for this setup will be BLOBBASEFEE instead of BASEFEE. It works the same as BASEFEE but in the proto-dank sharding environment. One advantage of BLOBBASEFEE is that it will provide more accurate information about the cost of running smart contracts in the Ethereum blockchain. It will further help improve the overall performance of the network.

Will the Ethereum (ETH) Price Increase after the Dencun Upgrade?

As per the ongoing market reaction over the Dencun Upgrade, a significant surge in Ethereum price seems highly possible in the upcoming days. A week before the Dencun upgrade date for its Goerli Testnet launch (January 17 2024), Ethereum hit its 19-month high by reaching $2,371 in the second week of January 2024.

The recent hype around the Dencun upgrade among the Ethereum community also signals widespread adoption and anticipation for it. Moreover, the Ethereum price has been experiencing a bullish ride for the past two months, with the Dencun upgrade being the key factor behind it. Considering it, many experts predicted that ETH can soon touch the price target of $3500 if it can maintain its price above $2157.

On the technical side, the Dencun upgrade promises the introduction of proto-dank sharding, which can boost the performance of Ethereum layer-2 rollups by reducing the transaction cost. That's why Ethereum developers eagerly await the successful testnet launches of this Ethereum upgrade.

It is also worth noting that the upcoming time will also be crucial for the institutional adoption of Ethereum as multiple finance giants like BlackRock and VanEck have filed for spot Ethereum ETFs. Since Bitcoin Spot ETFs recently got approval, investors are confident that Ethereum Spot ETFs will also get similar acceptance in the traditional equity market.

If the Goerli, Sepolia and Holesky testnet launches of Dencun upgrades become successful, we can witness the mainnet launch of this upgrade by the beginning of the second quarter of 2024. This second quarter period will be the same period when the SEC will have to give the final decision on the pending Ethereum Spot ETF applications.

Considering this possible scenario of the Dencun upgrade launch coinciding with the period of spot ETH approval, multiple analysts have given bullish Ethereum price predictions for 2024. One of them is JP Morgan's analyst, Nikolaos Panigirtzoglou, who stated that Ethereum will outperform Bitcoin in 2024. He stated that the ETH price could soar between $3,400 and $3,800 by the end of the first quarter. Thus, the upcoming Dencun upgrade launch dates can be the harbinger of a solid bullish era for Ethereum (ETH).

For more info on the Ethereum Price Prediction, click here.

FAQs

Does ETH have a good future?

Ethereum developers have been performing significant upgrades in the Ethereum blockchain every year. These upgrades work towards mitigating the existing limitations of Ethereum, like scalability, speed, and high transaction fees. Thus, we can say that Ethereum holds strong potential for a good future, both in price and adoption in the upcoming years.

Can Ethereum be upgraded?

Yes, Ethereum can be upgraded. Ethereum undergoes regular updates and improvements to enhance its scalability, security, and functionality. These upgrades are implemented through network-wide consensus among users, developers, and stakeholders. Ethereum's upgrade process reflects its commitment to ongoing development and adaptability within the blockchain ecosystem.

What will be the Dencun upgrade effect on the Ethereum price?

According to crypto analysts and experts, the Dencun upgrade will positively impact the Ethereum price. The reason is the EIP-4844 enhancement, which will introduce blob-carrying transactions in the Ethereum blockchain. These unique data-carrying concepts will organize the Ethereum data, leading to cheaper transaction costs and higher processing capacity for Ethereum and its L2 solutions.

What is the Dencun upgrade?

Dencun upgrade is the upcoming major improvement in the Ethereum blockchain. It combines two upgrades (Deneb and Cancun) with nine EIP implementations. Each of these EIP implementations targets to better the existing state and performance of the Ethereum blockchain. The most important EIP among them is EIP-4844, which will roll out proto-dank sharding on the Ethereum blockchain. The Goerli testnet launch of the Dencun upgrade is scheduled for January 17 2024.