Goldman Sachs, in a recent note, highlights that Ethereum’s forthcoming Dencun upgrade, expected in the first quarter of 2024, marks the next evolutionary stage in the blockchain’s progression toward becoming a scalable settlement layer.
The primary impact of Dencun will revolve around augmenting data availability for layer-2 rollups through proto-danksharding, resulting in reduced transaction costs for rollups, ultimately benefiting end users. In this context, a layer 1 network represents the foundational layer of a blockchain, while layer 2 comprises off-chain systems or separate blockchains built on top of layer 1. Rollups efficiently process transactions on a faster layer 2 blockchain and then relay the data back to the parent blockchain, all at a significantly reduced cost.
Proto-danksharding will serve as the foundation for future scalability upgrades, including danksharding, as part of Ethereum’s ‘Surge’ roadmap. Danksharding, a method to enhance Ethereum’s scalability, shares the concept of splitting the network into shards but focuses on increasing space for data groups rather than just transaction capacity.
Dencun is poised to elevate Ethereum’s scalability through rollups, optimizing gas fees, enhancing network security, and implementing various housekeeping updates, according to the report.