On March 13, nearly two months ago, Ethereum implemented its most significant upgrade in the past 20 months, marking a notable development since the Ethereum Merge on September 15, 2022. Known as Dencun or Cancun-Deneb, this upgrade introduced the highly anticipated Proto-Danksharding feature, designed to significantly improve the scalability of Ethereum’s Layer 2 solutions, also known as rollups.

This enhancement has allowed rollups to drastically reduce transaction costs by approximately five to 10 times, while also stabilizing their cost fluctuations. Although transaction fees for rollups were considerably lower than those of standard Ethereum transactions even before the introduction of Proto-Danksharding, they are now remarkably cheaper.

Chart 1: Average Ethereum vs. Rollups Transaction Fees

Proto-Danksharding has achieved this by introducing what are termed as ‘blobs.’ These are large data chunks that can be added to Ethereum blocks but are kept separate from the transaction data required for smart contract execution. ‘Blobs’ are engineered to temporarily hold large data components from rollup transactions, such as batches of transactions or zero-knowledge proofs, and are removed from the blockchain after 18 days, once they are no longer necessary for verifying the validity of transactions.

We recommend reading Crypto Moves #16 for a detailed explanation of rollups, including the Proto-Danksharding upgrade of Ethereum. Crypto Moves #20 discusses the immediate effects on the ecosystem of various rollups following the implementation of Proto-Danksharding on the Ethereum blockchain.

This issue of our Crypto Moves editorial was published just over a week after the first ‘blobs’ were utilized by rollups on Ethereum. By that time, many rollups’ ecosystems were showing significant growth in key metrics such as total transactions, active addresses, and stablecoin supply. For example, by this point, the total stablecoin supply on Coinbase’s Base rollup had surged by 39.8%, from $279.4 million to $390.5 million.

We have been quite vocal in stating that Proto-Danksharding is exceptionally beneficial not only to the rollups themselves but also to Ethereum as a whole. Our viewpoint is based on the fact that rollups are an integral part of Ethereum. To put it plainly, rollups are Ethereum, and Ethereum is rollups; what benefits one, inevitably benefits the other. End of discussion.