Thread by @christine_dkim

📬NEW REPORT ALERT 📬

This one is on EIP 4844, proto-danksharding, the most important code change going into the next Ethereum upgrade, Cancun/Deneb.

galaxy.com/research/insig…

At a high-level, EIP 4844 introduces a new transaction type, called blobs, increases the data and storage requirements of Ethereum blocks, and creates a new fee market for pricing blobs separately from regular transactions.

Additionally, proto-danksharding is a precursor and “prototype” of full danksharding which will enable existing Ethereum nodes to safely process several more blobs per block than the initial maximum set out by EIP 4844.

Importantly, EIP 4844 does not improve Ethereum’s scalability as a general purpose blockchain for transaction and smart contract code execution. It does not materially increase or introduce improvements to the transaction capacity of Ethereum itself.

Proto-danksharding reduces the cost of posting large amounts of data to Ethereum and thereby lowers the operational cost of rollups. For the past four years, the transaction activity of Ethereum rollups like @arbitrum and @optimismFND has been growing.

Data: @l2beat

@arbitrum @optimismFND @l2beat Compared to the costs of deploying code and transactions to Ethereum directly, rollups have saved end-users and dapp developers over 99% on gas fees.

Data: @blockworksres via @DuneAnalytics

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics The goal of EIP 4844 is to reduce rollup costs through the introduction of a new transaction type known as binary large objects, or blobs. The following is a step-by-step illustration of the lifecycle of a blob transaction as defined by EIP 4844:

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics EIP 4844 does not impact how regular transactions submitted to the Ethereum mempool get included in a block or the fee market that dictates how to price Ethereum block space, but EIP 4844 does increase the storage requirements of Ethereum blocks.

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics The additional data space is designed for attaching blob transactions to blocks. Blobs are like side cars that can be attached to Ethereum blocks without impacting or crowding out existing blockspace for processing regular transactions.

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics Blob blockspace will be auctioned according to its own fee market, modelled after the fee market design of EIP 1559.

For more information about EIP 1559:
galaxy.com/research/insig…

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics There are many parallels to the introduction of blobs on Ethereum and the introduction of segregated witness (segwit) on Bitcoin. However, one of the main differences between segwit and EIP 4844 is the expected long-term impact of these code changes.

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics The following is a table summarizing a few metrics relevant to evaluating EIP 4844 impacts:

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics Due to the ever-evolving capacity and functionality of rollups built atop Ethereum, it is difficult to accurately predict by what magnitude EIP 4844 will impact fees and activity on Layer-2 rollups. In summary, the expected benefits of EIP 4844 on Ethereum are:

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics Without meaningful migration of tx activity to L2s post-Cancun, end-users will still be subject to the same bouts of high fee volatility and tx congestion on Ethereum unless they submit txs through a rollup sequencer, which are generally operated by centralized entities.

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics Rather than a silver bullet for solving scalability issues on Ethereum, proto-danksharding should be considered the first step of many towards transforming Ethereum into a modular blockchain that primarily supports transaction execution through Layer-2 rollups.

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics Special thanks to @terencechain, @TimBeiko, @adietrichs, @kelvinfichter, @trent_vanepps for your help with this report. Your feedback was invaluable 🙌

@arbitrum @optimismFND @l2beat @blockworksres @DuneAnalytics @terencechain @TimBeiko @adietrichs @kelvinfichter @trent_vanepps For a more detailed breakdown of EIP 4844, its impacts, and limitations, check out the full report on galaxy.com.

galaxy.com/research/insig…

And shoutout to @jaxnussbaum for help with the data featured in this report! 🙌