The upcoming Proof-of-Stake consensus switch for Ethereum may be the focus of all attention. In addition to the Ethereum Merge, a lesser-known update to reduce Ethereum’s transaction costs and increase scalability is planned. Following the Merge, the EIP-4844 update is expected to be the next Ethereum fork. It will almost certainly include “proto-danksharding,” which could make scaling Layer 2 rollups up to 100 times easier. Furthermore, it can pave the way for the implementation of full sharding.
This is key because the Ethereum roadmap now in place bets on the network’s developing Layer 2 ecosystem that will deal with scalability and fee mitigation until sharding is enabled down the road. It is anticipated that in the future, Layer 2 chains will become the network’s shards, allowing Ethereum’s computing load to be distributed among an ecosystem of small chains running in parallel.
L2fees estimates that the average cost of a token transfer on Ethereum’s top rollup networks is $0.1, with swaps costing around $0.15. Vitalik Buterin, Ethereum’s co-founder and chief scientist, said that $0.05 was “not acceptable” for transaction fees on L2.
Ethereum Hard Forks
The Ethereum Merge is the most significant update in the cryptocurrency industry’s history. Several factors will determine the successful transition from proof-of-work to proof-of-stake, and it may significantly impact the prices of Ether (ETH) and Bitcoin (BTC).
Chandler Guo, a seasoned cryptocurrency investor and Ethereum supporter, stated earlier this month that the network had a 10% chance of splitting. He also stated that if it did, he would support a stablecoin based on a proof-of-work fork. Many stablecoin issuers said they would only accept redemptions from the Ethereum standard proof-of-stake chain. Ordinary investors may be perplexed by hard forks.
In the wake of the Merge, scheduled for mid-September, the network’s energy usage will decline by more than 99 percent, and the issue of new Ether will drop by around 90 percent. However, many in the community have unrealistic expectations that the upgrade will significantly improve Ethereum’s scalability and decrease network fees.
The protocol development coordinator at the Ethereum Foundation, Tim Beiko, recently informed The Defiant that proto-danksharding would go live between six and nine months after The Merge. While he acknowledged the potential benefits of EIP-4844, he cautioned that “upgrade timetables are notoriously hard to estimate” and that the proposal would require governance approval before being implemented.
Sharding and Proto-Danksharding
Feist created Proto-danksharding, the most recent version of sharding, in accordance with Ethereum’s scaling strategy. It is the first step in Ethereum’s two-part sharding implementation procedure. Before sharding the network, it will install most of the necessary infrastructure. Danksharding specifications will include transaction forms, verification guidelines, consensus and execution logic, and gas price changes. Full danksharding could improve Ethereum’s scalability by orders of magnitude in two to three years.
Danksharding reduces block size and performance in rollups by about 100 times because each validator only needs to download a small fraction of the block. Rollups are used by companies such as Arbitrum, Optimism, and Polygon. They have emerged as the top Layer 2 scaling option for Ethereum. Furthermore, rollups work by combining transactions that occur on a low-cost Layer 2 network. Then, in groups, they are sent to Ethereum’s foundation layer for verification.
This significantly reduces transaction fees. According to Mofi Taiwo, an engineer at OP Labs, the company behind Optimism, the user experience with proto-danksharding is the same as with complete sharding in L2s and other applications. He said that Ethereum could provide a comprehensive data availability solution for rollups while full sharding is implemented, significantly lowering their costs. However, there is a chance that the merger will not go as planned or that a contentious hard fork will have a negative impact on crypto market prices.
Because until sharding is enabled later, Ethereum’s current roadmap is banking on the network’s developing Layer 2 ecosystem to handle scalability and fee reduction. The Ethereum network will be load-balanced in the future, with Layer 2 chains serving as the initial network shards. Sharding will distribute Ethereum’s computational load across an ecosystem of interconnected small chains.
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