Ethereum Dencun Upgrade: What You Need to Know About Proto-Danksharding and Lower Fees

Ethereum is making a major move. The Cancun-Deneb (Dencun) upgrade went live on the mainnet on March 13, 2024, introducing Proto-Danksharding through EIP-4844—a fundamental shift aimed at solving one of the network’s most pressing problems: skyrocketing gas fees.

Why Should You Care? Real-World Impact on Fees

Here’s what matters if you use Ethereum or Layer-2 networks: the Dencun upgrade is expected to slash gas fees dramatically, potentially by 10-100x on Layer-2 solutions like Arbitrum, Optimism, and Polygon.

Current costs tell the story. At the time of the upgrade, average ETH transfers were running $0.24 on Arbitrum, $0.47 on Optimism, and $0.78 on Polygon. Token swaps? Even pricier at $0.67, $0.92, and $2.85 respectively. Post-upgrade, these numbers are anticipated to drop significantly, making these networks far more practical for everyday users and developers building dApps.

What Is Proto-Danksharding?

The technical foundation here is EIP-4844, also called Proto-Danksharding. Instead of the usual approach, the upgrade introduces “blobs”—large data bundles that increase Ethereum’s capacity for storing and processing information without clogging the base layer.

Think of it this way: Layer-2 solutions batch transactions and submit them to Ethereum’s mainnet. Proto-Danksharding gives these batches dedicated, temporary storage space—roughly 1 MB per slot—making the process cheaper and more efficient. This is just the first phase; full Danksharding will eventually divide Ethereum into multiple shards, each handling transactions independently.

The Dencun Upgrade: Beyond Proto-Danksharding

Dencun isn’t just about blobs. The upgrade includes several other technical improvements:

EIP-1153 introduces transient storage opcodes, cutting gas costs by enabling temporary data storage during smart contract execution. EIP-4788 enhances the consensus layer by granting direct access to updated information. EIP-5656 adds the MCOPY opcode for more efficient memory operations. EIP-6780 restricts the SELFDESTRUCT function to improve network security. And EIP-6493 tweaks how validators choose which block to follow, improving finality and potentially reducing centralization.

Timeline to Activation

The Dencun upgrade followed a careful rollout schedule across testnets before mainnet deployment:

• January 17: Goerli Testnet activation
• January 30: Sepolia Testnet activation
• February 7: Holesky Testnet activation
• March 13: Mainnet deployment

This phased approach allowed developers and validators to test thoroughly before the main network went live.

Scalability and Performance Gains

Ethereum’s transaction throughput is set to leap forward. Currently, the network processes roughly 15 transactions per second (TPS). Post-Dencun, combined with Layer-2 adoption, throughput is expected to approach 1,000 TPS, dramatically improving transaction speed and network efficiency.

By handling data more intelligently through Proto-Danksharding, Ethereum reduces network congestion. Less congestion means lower competitive pressure for block space, which directly translates to lower fees.

Impact on Layer-2 Networks

Layer-2 solutions benefit substantially. With Ethereum’s base layer now more efficient, Layer-2s can finalize transactions more rapidly and cost-effectively. The result: interoperability between layers improves, settlement costs drop, and the overall economics of using these networks becomes more attractive.

Data Availability (DA) layers like Celestia, EigenDA, and Avail also see positive effects. Proto-Danksharding reduces the cost of accessing and storing DA data, making these infrastructure providers more economically viable.

Ethereum’s 2.0 Journey: Where Dencun Fits

The Dencun upgrade is a milestone within Ethereum’s broader 2.0 roadmap:

• The Merge (September 2022): Ethereum transitioned to Proof of Stake, cutting energy consumption by 99.5%
• Shanghai Upgrade (April 2023): Enabled ETH staking withdrawals, increasing participation
• Dencun Upgrade (March 2024): Introduces Proto-Danksharding for scalability
• Future: Electra + Prague (Petra) will explore Verkle Trees for further optimization

The path ultimately leads to full Danksharding, which will divide Ethereum into independent shards, each capable of parallel processing.

Potential Risks Worth Monitoring

No upgrade is without risks. Technical complexities could introduce vulnerabilities. Compatibility issues may temporarily disrupt existing smart contracts and dApps during transition. Gas fees might fluctuate as the network adjusts, and actual savings depend on how quickly developers and users adopt the new features.

What’s Next?

The Dencun upgrade positions Ethereum as a more scalable, efficient platform. With gas fees poised to drop dramatically and transaction throughput increasing exponentially, the network becomes more accessible to retail users, developers, and enterprises.

Traders and investors should watch adoption rates of the new blob functionality, monitor Layer-2 fee trends, and consider the implications for the broader Ethereum ecosystem. As the network moves toward full Danksharding, Ethereum’s transformation into a high-throughput, low-cost blockchain is accelerating.