Ethereum Dencun Upgrade: How New Scalability Improvements Will Transform the Ecosystem

admin February 25, 2025

0 284 4 minutes read

Ethereum remained the highest-earning blockchain in 2024, generating $2.48 billion in fees, a 3% increase from the $2.41 billion collected in 2023, according to a CoinGecko report published on January 21, 2025. Ethereum has established itself as the leading smart contract platform worldwide, with regular updates playing a key role in developing all crypto projects. In March 2024, the Ethereum network introduced an upgrade called Dencun, which pushes the boundaries of constant innovation.

What is Dencun?

Dencun is an upgrade to the Ethereum network that is required to enable danksharding and Verkle Trees. It marks the largest upgrade since Shapella, which the Ethereum network deployed in April 2023. Like other major upgrades, Dencun affects both the consensus and execution layers, so it essentially consists of two large modules that form its name:

Deneb—a block of EIPs that address network consensus.
Cancun—includes new features in the execution layer.

Key Ethereum Improvement Proposals (EIPs) in Dencun

Network Stability and Validator Adjustments

EIP-7045 improves the evaluation of votes (attestations) determining each block’s compliance with network rules. The proposal extends the attestation submission time to gather more opinions, thereby strengthening network consensus.
EIP-7514 introduces restrictions on new validation entries, which have increased significantly since the Shapella update. This increase in validators has led to higher Ethereum issuance rates as validators receive ETH payments. The increased issuance rate puts pressure on cryptocurrency prices by expanding the market supply.
EIP-7044 introduces perpetual signatures for voluntary exits from ETH staking. With the help of EIP-7044, developers will solve the problem of stakers’ dependence on validators, without whose approval market participants were previously unable to withdraw their staked coins.

Lower Gas Fees

EIP-5656 aims to reduce costs when creating smart contracts by introducing MCOPY, a new command for basic memory copy operations. This command won’t affect existing smart contracts that use the traditional MSTORE and MLOAD commands.

Improved Security Measures

EIP-6780 aims to revise the SELFDESTRUCT function — a command created to delete unnecessary or obsolete information from the network. Although well-intentioned, the implementation of SELFDESTRUCT’ often led to unpredictable consequences. Although the feature cannot be completely removed without harming existing smart contracts, EIP-6780 will help to safely mitigate its negative effects.
EIP-4788 streamlines the exchange of information between the execution and consensus layers. This improvement will particularly benefit liquid staking and restaking platforms that previously relied on external oracle networks for consensus information. This dependency not only created additional costs, but also forced platforms to rely on third-party data providers. With EIP-4788, platforms can now access information directly from the source, cutting out the middleman.

Optimized Speed and Capacity

EIP-1153 introduces temporary storage that clears after each transaction, eliminating permanent space usage. According to its authors, this proposal will reduce costs and remove the need for insecure data exchange that was previously required with conventional storage systems.
EIP-4844, known as ‘proto-danksharding,’ is Dencun’s most anticipated feature. This upgrade introduces a new transaction type that includes data as binary objects (blobs). While these blobs are large, they differ from blocks in that they’re only temporarily available rather than permanently stored in the blockchain. This temporary blob storage will cost less than permanent block storage.

How Dencun Upgrades Impact the Ethereum Ecosystem?

Scalability

Dencun is expected to significantly reduce transaction costs for Layer 2 (L2) networks by implementing improvements aimed at increasing the scalability of Ethereum. This improvement mainly focuses on scaling and performance optimization, promising a more efficient and user-friendly experience. The introduction of features such as improved transaction processing, reduced gas fees, and increased throughput should turn around the efficiency and availability of the Ethereum platform.

According to a CoinGecko report published on January 23, 2025, Ethereum Layer 2s climbed throughout 2024 Q4, with the top 10 Layer 2s reaching 15.0 million daily transactions on average. Transactions were mainly driven by Base, which had a daily average of 7.2 million in Q4. This represents an increase of +78.7% from Q3, when it had a daily average of 4.0 million. In comparison, Ethereum mainnet processed ~1.2 million daily transactions in Q4. 48.3% of transactions on the top 10 Layer 2s in Q4 were conducted on Base.

Expanding Capabilities

According to Bitget Research, the Dencun upgrade aims to enhance Ethereum’s feature set by increasing the number of mainchain transactions per second, reducing gas fees and improving overall network performance. The Cancun upgrade is expected to increase Ethereum’s throughput by over 100x while reducing Layer 2 transaction costs to less than $0.001. This upgrade should benefit Layer 2 networks such as Arbitrum, Base, zkSync, and Scroll.

Cryptographic Advancements

EIP-4844 introduces new cryptographic tools, including the KZG commitment scheme. These tools verify the validity of off-chain data stored in blobs without revealing the actual data, strengthening network security.

Network Performance and Adoption

Dencun’s improvements to Ethereum transaction processing and cost reduction are likely to attract more developers and users to the ecosystem. This increased adoption and utility could increase demand for ETH, leading to a potential price increase.

Potential for a Spot ETH ETF

Dencun’s upgrade could pave the way for a spot ETH ETF in the United States. An ETF is an investment vehicle that tracks the price of an asset, allowing investors to gain exposure without directly owning the asset. With the approval of the Bitcoin ETF in early 2024, the ETH ETF could attract both institutional and retail investors to Ethereum.

Final Thoughts

The Dencun upgrade marks a major step in the evolution of the Ethereum network. With key EIPs, the network optimises its consensus and execution layers to improve efficiency and availability. Improved security reduces vulnerabilities, while increased transaction throughput drives network adoption. These advances make Ethereum more competitive and attract both developers and institutional investors.

The Dencun upgrade has attracted significant attention, fuelling both speculative interest and long-term adoption, as evidenced by the ETH price chart. This reaction is justified, as Dencun is more than just an upgrade; it is a major milestone on Ethereum’s path to full Danksharding and mass adoption. Improvements in speed, cost, and security solidify Ethereum’s position as the leading smart contract platform.