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Ethereum's Dencun Upgrade Aims to Boost Liquid Staking and Layer-2 Efficiency

The upcoming Ethereum upgrade, Dencun (EIP-4844 Cancun-Deneb), is set to stimulate liquid staking and improve layer-2 scalability. This upgrade, expected in Q4 2023, follows the successful Shapella Upgrade and focuses on reducing transaction costs and optimizing data storage on the Ethereum network.

Ethereum's Dencun Upgrade Enhances Liquid Staking

Ethereum's forthcoming upgrade, known as Dencun (EIP-4844 Cancun-Deneb), is poised to stimulate liquid staking and improve scalability on the network. Set to be implemented in Q4 2023, this upgrade follows the successful Shapella Upgrade and focuses on reducing transaction costs and optimizing data storage within the Ethereum ecosystem.

After the Shapella Upgrade took effect on April 12, 2023, the Ethereum community decided on the Dencun upgrade during a bi-weekly all-core developer call. Initially referred to as proto-danksharding, it was later named Dencun. The upgrade centers around the introduction of a new transaction type called the "blob-carrying transaction." This temporary data storage mechanism is expected to significantly reduce transaction costs for layer-2 users.

Peter Szilagyi, the team lead of the Ethereum Foundation, advocated for prioritizing EIP-4844 in January 2023, despite the focus at the time being on the withdrawal of staked ETH, a feature introduced by the Shapella Upgrade.

The Dencun upgrade consists of the Cancun execution layer and the proto-danksharding feature. This upgrade enables the transmission of large "blobs" of data to nodes on the Ethereum network within a limited time. Interestingly, the data is permanently hosted on the layer-1 chain.

In EIP-4844, the data is stored for a significant period to allow nodes to demonstrate and execute layer-2 roll-ups, facilitating efficient transactions on layer 2. Sequencers play a crucial role in receiving and organizing transactions, reducing the load on the blockchain.

Dencun also aims to eliminate the SELFDESTRUCT opcode to pave the way for statelessness. In this context, state refers to all crucial information available on the blockchain, including accounts, balances, deployed smart contracts, and storage requirements. The upgrade shifts the responsibility of storing complete blockchain state information to specialized "archival nodes." This approach enables the use of a more extensive set of full nodes while storing less data, simplifying node operation and promoting network decentralization.

During a call, Tim Beiko, the project coordinator, highlighted the significance of the self-destruct proposal and mentioned that an external auditor is assessing the impact of using on-chain data on currently deployed smart contracts. The results of this assessment are expected in August 2023.

Vitalik Buterin, Ethereum's co-founder, outlined a roadmap for the blockchain ecosystem in November 2022. Following the upcoming Dencun upgrade, future plans include the Verge upgrade, incorporating Verkle trees to increase scalability and efficient data proofs. The subsequent Purge upgrade aims to remove historical data from the network, reducing congestion and significantly increasing transaction speed. Buterin envisions a network capable of processing 100,000 Transactions per Second (TPS) after the Purge upgrade, compared to the current rate of approximately 29 TPS.