TL;DR
The next big thing on Ethereum’s roadmap is Ethereum Improvement Proposal (EIP) 4844, called Proto-Danksharding. It is designed to improve the scalability of Layer 2s (L2s) built on top of Ethereum. And it’s only a prototype version on the way to full Danksharding. Proto-Danksharding is scheduled for Q3/Q4 this year with Ethereum’s Cancun hardfork. It should reduce L2 fees by at least a 10x and it’s only the beginning of Ethereum’s scalability journey.
Layer 2 chains (for example Arbitrum, Optimism, ZKSync Era) have come of age. A Layer 2 is a separate chain that inherits the security from the underlying layer-1 blockchain – in this case Ethereum.
And… people are finally using Ethereum L2s. In fact, daily activity has been outpacing Ethereum main net through 2023. In the last two months, it’s been by nearly a 3:1 margin. Here’s the chart. Red is added Layer 2 transactions, blue line is Ethereum.
Now, as a precursor to our topic, let’s have a look at the current (July 2023) fees of L2s.
These fees look quite ok, but they’re not where they should be if we want to transact very often, in a way that would be required by regularly using large-scale applications like games and social media on Layer2s.
This is where sharding comes in. Sharding is a way to store data more efficiently. In computer science, sharding is a method of dividing a database into smaller, more manageable partitions called shards.
The confusing part here: there will be no sharding involved in the proto phase of Danksharding. Sharding will only happen during full Danksharding (more on that later).
What is Proto-Danksharding?
Proto-Danksharding is a way for L2s (or: rollups) to add data to blocks more cheaply. The name comes from the two researchers who proposed the idea: pseudonymous Protolambda and Dankrad Feist (not pseudonymous, the guy is actually called that).
Proto-Danksharding is a scalability upgrade. It’s all about a more efficient interaction between Layer 2 rollups and Ethereum.
How does this work? A rollup does a lot of processing independent of Ethereum. An L2 can process transactions and smart contracts but for data storage, it relies on Ethereum main chain. So, sooner or later, it has to touch base with the main chain. In jargon: L2s rely on the inclusion of batched transaction data in Ethereum blocks for transaction finality.
Currently, Rollups have to deal with the data-intensive and thus expensive process of posting so-called calldata to Ethereum. Roughly 90% of the transaction fees you pay on Layer 2s go to storing calldata on Ethereum main net.
Why are calldata expensive? Because they must be processed by all Ethereum nodes and live on chain forever – even though rollups only need the data for a short time!
Proto-Danksharding introduces data blobs that can be sent and attached to blocks. Think of these as sidecars attached to an Ethereum transaction. Instead of providing more space for transactions, Ethereum will provide more space for blobs of data.
The data in these blobs are not accessible to the EVM and are automatically deleted after a fixed time period. This means L2s can send their data much more cheaply and pass the savings on to end users in the form…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
