Ethereum (ETH) has its limitations. It was clear from the beginning that the existing technology would be unable to handle large volumes of transactions. With its increasing use cases across and critical importance to various sectors, implementing innovative solutions to scale the network is imperative. The Dencun upgrade — scheduled to occur on March 13 — is a step in the right direction, but it is only a short-term patch where a sustainable, long-term solution is needed.
Finding a balance between scalability, security, and decentralization has been a long-standing issue of the blockchain trilemma. However, multi-chain solutions, with their emphasis on interoperability and security, have the potential to help Ethereum reach its full potential.
Dencun is a temporary solution
The Dencun upgrade, aimed at enhancing Ethereum’s scalability, is currently being implemented across testnets. While a bug caused an upgrade delay on the Goerli testnet, the deployment on Sepolia and Holesky went pretty smoothly.
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Dencun introduces the concept of proto-danksharding, which is designed to reduce the cost of transactions by using the “blob” format instead of calldata. Data blobs will deliver major storage efficiency improvements by making transaction data temporarily available in a “compressed” format. They could be drastically more cost-effective than calldata, with the potential for a cost reduction of 80 to 90%. The same format will be used for the full sharding upgrade later on. Overall, the Dencun upgrade will bring greater storage efficiency, lower gas fees, and an overall better experience for developers, while making rollups even more cost-efficient.
Dencun upgrade expected to complete on March 13 is driving ETH.
— Juan Leon (@singularity7x) February 22, 2024
EIP-4844 will enable "data fingerprints" that compress transaction data structures, bringing down L2 transaction fees to below $0.01.
This will be massively accretive for the scaling of the Ethereum network, and… https://t.co/VulEgyEzZD
While a step in the right direction, the Dencun upgrade is not a permanent solution. The upgrade is focused on making data storage more efficient, which is no doubt beneficial. But the long-term issue facing the Ethereum network is capacity. The focus going forward must be on expanding the network’s capacity to support the increasing number of transactions being executed, and we do this through multi-chain solutions.
The way forward
Multi-chain solutions, namely rollups and appchains, are ideal mechanisms for increasing the capacity of Ethereum in the long term.
Appchains, also known as application-specific blockchains, are specialized blockchain networks with their own dedicated processing power and storage, designed to serve a single application. They can be built on top of a larger mainnet, such as Ethereum, or even layer-2 (L2) chains. Transactions are offloaded from the mainnet and are instead, processed by the appchain. If used widely, appchains can and will dramatically increase Ethereum’s capacity.
Rollup technology can be used for building appchains, but is different in that it processes transactions off-chain. Transactions are executed off-chain, then "rolled up" into a single transaction, and fed onto the mainnet. Rollups are generally less efficient than appchains, as they usually rely on the main chain for security more often than appchains. They are also less customizable than appchains, but they still offer some flexibility and are easier to deploy and manage.
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While both are useful on their own, using rollups and appchains can achieve a synergistic effect, combining the transaction efficiency of rollups with the flexibility and customization of appchains. Developers also benefit from expanding outside of layer-1 (L1) networks into a more scalable and versatile environment, enabling them to design and deploy blockchain applications that meet the demands of their user base while maintaining high levels of efficiency and security.
Through increased capacity, throughput, reduced latency, and improved resource management, multi-chain solutions enable the network to accommodate a higher volume of transactions while maintaining optimal performance.
Navigating the challenges
In fairness, implementing multi-chain solutions on the Ethereum network presents developers with a unique set of challenges that require careful navigation and consideration. One of the primary obstacles is the complexity associated with managing interoperability between different chains, necessitating a thorough understanding of cross-chain communication protocols and integration techniques. Ensuring consistent security measures across multiple chains poses a significant challenge is another challenge.
Overcoming these challenges requires a comprehensive understanding of the technical intricacies involved, along with a commitment to fostering an accessible and developer-friendly environment that promotes the seamless integration and effective utilization of multi-chain solutions.
The future of Ethereum is exciting. Finance, identity, gaming, supply chains, healthcare, food supply, and a host of other industries are reaping the benefits of the network. But with rapid growth comes growing pains.
Capacity is an increasingly concerning issue for Ethereum. While the Dencun upgrade will help the situation by improving efficiency, it is only a band-aid solution. The best way forward in the long-term is to increase capacity, which is best done through multi-chain solutions such as appchains and rollups.
Nebojsa Urosevic is the co-founder and senior vice president of research and development at Tenderly, a development platform for Web3 developers to build, test, and operate smart contracts. Prior to joining Tenderly, Nebojsa was a blockchain engineer at Decenter from 2017-19. He has also worked as a software engineer at GoDaddy and Devana Technologies. He holds a bachelor's degree in computer science and informatics from the University of Belgrade.This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
