Dencun, the Ethereum Upgrade Poised to Revive Liquid Staking

Ethereum’s upcoming upgrade is the EIP-4844 Cancun-Deneb, aka Dencun, which will aim to stimulate liquid staking, and it is expected to arrive in Q4 2023. The upgrade would stimulate proto-dansharding and blobbing and will be the next major upgrade after the Shapella Upgrade which had arrived on April 12, 2023, and enabled unstaking of staked ETH.

Upcoming Ethereum Upgrade and Liquid Staking

After the Shapella Upgrade took effect on April 12, 2023, the consensus during a bi-weekly all-core developer call decided on the new upgrade. Dencun would focus on an important feature essential for the success of the network’s roll-up-centric roadmap. Initially, the nickname for the upgrade EIP-4844 was proto-danksharding, and it was later named Dencun.

Dencun or proto-danksharding introduces a newer type of transaction, the “blob-carrying transaction.” This would present a temporary data storage mechanism and is expected to drastically reduce the transaction costs for layer-2 users.

The team lead of the Ethereum Foundation, Peter Szilagyi, suggested making EIP-4844 a priority in January 2023 when his peers subdued his voice to focus on the withdrawal of staked ETH, a feature that would be introduced by the Shapella Upgrade.

Cancun is the execution layer part of the upgrade, while proto-danksharding would be front and center. The upgrade would allow large “blobs” of data to be transmitted to nodes on the Ethereum network in a limited time. It is ironic that the data is permanently hosted on the layer-1 chain.

The data in EIP-4844 is stored there for a significant period for nodes to demonstrate and carry layer-2 roll-ups. This would allow for making effective transactions on layer 2. Sequencers have the role of receiving and keeping the transactions in order and would face a reduced load on the blockchain.

Dencun is an attempt to get rid of the SELFDESTRUCT opcode to make way for statelessness. Here, state refers to every piece of crucial information available at the given time for the blockchain, including all the accounts, individual balances, all deployed smart contracts, and the storage requirements for all this data.

The upgrade would shift the responsibility of storing the complete information of the blockchain’s state to a specialized “archival node.” This would facilitate storing a more extensive set of full nodes in order to store less data. Moreover, this makes running the node much easier and paves the way for network decentralization.

Call moderator and project coordinator Tim Beiko said that “clearly the self-destruct [proposal] is the second most mentioned EIP beyond 4844.” He also pointed out that an external auditor is hired to determine if with the usage of on-chain data can, the currently deployed smart contracts be broken down or changed. The results of the exercise are expected in August 2023.

Vilatik Buterin’s Road Map for Development

In November 2022, Vitalik Buterin released an updated roadmap diagram for the blockchain ecosystem, explaining what should be done to beat Bitcoin blockchain. After the upcoming Dencun upgrade, there are plans for upgradation that should take the blockchain to a whole new level.

Updated roadmap diagram! pic.twitter.com/MT9BKgYcJH
— vitalik.eth (@VitalikButerin) November 4, 2022

The next upgrade would be Verge, which shall include Verkle trees. It is supposed to increase scalability by allowing developers to store vast amounts of data. The users can access this massive information via a short proof-of-data verification dubbed as the root of that tree. This would make data proofs on the blockchain more efficient.

The purge would follow Verge, which would remove historical data from the network. This step will help reduce congestion and significantly increase the transaction speed. Buterin argues that once the upgrade is executed, the network can process 100,000 Transactions per Second (TPS). The current rate is around 29 TPS.