HomeCryptoEthereumEthereum: much lower fees after the Dencun update

Ethereum: much lower fees after the Dencun update

The next Ethereum update, called Dencun, is expected to bring a significant reduction in fees on rollups.

The rollups are some of the layer-2 solutions for Ethereum, and they are the ones that should benefit the most from the introduction of Dencun’s proto-danksharding.

The Dencun update of Ethereum and the reduction of fees

Dencun is an important update for Ethereum, precisely because it introduces the proto-danksharding.

This new feature will introduce a new type of transaction on Ethereum that accepts data “blobs”. 

Currently, to save data, we use the so-called calldata, which, however, take up more space and end up requiring higher fees.

Instead, blobs allow data to be stored in a substantially compressed manner, thus occupying less space and requiring lower fees. 

The name Dencun derives from the fusion of the names Deneb and Cancun, which are the respective names of the consensus level and execution level updates of Ethereum.

So, Dencun is the application at the same time of two updates, Deneb on the consensus level, and Cancun on the execution level. 

The reduction of fees

Thanks to the introduction of proto-danksharding, Dencun will allow a reduction in fees on rollup transactions. 

The most well-known rollups on Ethereum are Arbitrum and Optimism, and it will be these that can best take advantage of the fee reduction generated by the use of proto-danksharding. 

In short, transactions on Arbitrum, Optimism, and other Ethereum rollups may be lighter, and therefore cheaper, as the cost of fees depends on the amount of bytes occupied by individual transactions. 

According to developer Nebojsa Urosevic, using blobs instead of calldata will potentially lead to cost reductions of around 80% or even 90%. However, this only applies to transactions on rollups and not on the layer-1 of Ethereum. 

The cost of fees on Ethereum before the Dencun update

Lately, the average cost of a single transaction on the Ethereum layer-1 ranges from about $2 to over $9. 

Taking instead the median as a reference, which in this case is more representative of the basic transactions, the range is between $1 and $4. 

On Arbitrum the cost is about one hundred times lower, while on Optimism it would be even ten thousand times lower. 

However, these costs vary over time, so they can also be higher. 

Dencun should allow transactions on Arbitrum and Optimism to always maintain a very low cost, even in case of peak demand. 

These costs actually depend mainly on the level of network congestion, so much so that for example on the layer-1 of Ethereum at the end of December the median exceeded $6, and the average even $13. 

The only way to make microtransactions convenient is to always keep the fees very low, and with Dencun on rollups, this should finally become possible. 

In the future, however, another step forward will have to be taken, moving from proto-danksharding to actual danksharding, in anticipation of strong increases in Ethereum usage.

The problem solved

A few days ago, a test of the Dencun update was carried out on the Goerli testnet, with a negative outcome.

There was a problem that had caused the chain to split, but this problem has been identified. 

The problem was a bug in Prysm, the proof-of-stake client of Ethereum, and now it has been fixed. 

Now the developers are preparing for the next test, which will take place on the Sepolia testnet. 

The date of when Dencun should be brought to the Ethereum mainnet is still unknown, because in addition to the Sepolia test, it will also be necessary to successfully pass the test on the other testnet Holesky.

In other words, two more successful tests are still needed to decide the date when Dencun will become fully operational. Moreover, it is not even excluded that the next tests may also have a negative outcome, although the test on Goerli apparently had only one major problem that has been identified and resolved. 

I rollup

Rollups are effectively the preferred solution for making Ethereum more scalable. 

Basically, even though they are based on the Ethereum blockchain, they manage transactions on their own, making it unnecessary to record them on the original blockchain, the so-called layer-1. 

Recording a transaction on a layer-2 is faster and cheaper, precisely because it does not have to go through the Ethereum blockchain. 

The idea is very similar to that of Lightning Network for Bitcoin, although the technical implementation is different.

Layer-1s are slow and expensive, and not suitable for truly scalable cryptocurrencies. Layer-2s seem to be the best solution because they can rely on the high level of security of layer-1, while allowing much higher performance.

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".