Introduction

Why is it worth paying attention to Ethereum recently?

After the approval of the Bitcoin spot ETF, the next narrative immediately shifted to the core narrative logic of Ethereum: Ethereum spot ETF in May, London upgrade, Restaking, and more.

Exploring the Development Patterns of Ethereum

Before the Merge, Ethereum seemed more like the development model of a startup company. PoW endowed miners with block rewards as an early marketing strategy, not caring much about the value of the token. The token economy rapidly inflated, prioritizing the sedimentation of value over user experience.

The purpose of the Merge is not to improve Ethereum’s performance but to reduce the consumption of generating blockchains (converting PoW to PoS). Using a Web2.0 analogy, it is similar to optimizing the upstream part of an industry chain, laying the foundation for sustainable development in the future. The token economy also transitions to deflation, emphasizing user experience. Miner income gradually transforms into staking income, and Gas fee revenue decreases.

The London upgrade corresponds to part of The Surge, prioritizing user experience (such as increasing transaction speed and reducing Gas fees).

Future upgrade cycles will have relatively short intervals. After the Shanghai upgrade, Ethereum, in a sense, changes the PoW consensus to PoS, entering a mature phase. Although there will be several major upgrades in the future, the core purpose is to focus on on-chain scalability, simpler verification of blocks, cheaper fees, and more powerful and stable performance.

Some Reflections

The development of Ethereum is complex and diverse, and in the process of studying its overall development path, there are many unresolved issues that need consideration.

Vitalik has played a very strong guiding role in the development of Ethereum. In fact, from a corporate perspective, having a good CEO leading the charge is a very good development approach. Ultimately, all developments in the Ethereum ecosystem driven by Vitalik will contribute to the long-term success of ETH.

Projects like Arb, OP, ZKsync, Metis, and various Layer2 solutions; DeFi platforms like Aave, Compound, Uniswap, and many other high-valuation projects are attached to Ethereum. They have become popular narratives for a period of time, and Ethereum, to a greater or lesser extent, benefits from these trends.

Rather than being similar to Microsoft or Apple, Ethereum feels closest to Nvidia. Whether it’s AI development, VR/AR, Web3.0, various clouds, or computing power centers, all cutting-edge technologies are inseparable from computing power, and therefore, from Nvidia.

Web 3.0 also has a similar status. Any development is challenging to separate from Ethereum’s growth. While the Ethereum narrative was relatively quiet for a period, the London upgrade and the Ethereum spot ETF have led to a rise in Layer2 and ETH prices. Earlier developments like DeFi Summer and NFT Summer also contribute to boosting Ethereum’s price. Projects with a longer half-life need sufficient interaction with Ethereum.

Many projects that want to move away from Ethereum are basically thinking with the logic of an “Ethereum killer.” TON, discussed earlier, did not gain much traction after not positioning itself as an Ethereum competitor.

The development of Ethereum is quite centralized. The Ethereum chain itself is decentralized, but sometimes it feels like Ethereum’s development centralization is on par with the Uniswap team, not as well-distributed as some protocols like Aave and MakerDAO. This indirectly reflects that for a project to develop well, it may fundamentally require a certain level of centralization.

Perhaps one day, Ethereum can mature to a stage where it achieves complete decentralized governance. However, at least until Vitalik is still young, I feel that day is far off. On the other hand, Ethereum is only an 11-year-old company and is far from being considered mature.

1. Background—Brief Overview of Ethereum History

1.1 History and Forks

The following content frame is quoted from: https://ethereum.org/zh/history, and other public information. For more specific content, please click on the link for reference.

2013: Phase 0 - The birth of Ethereum

White paper released, Ethereum was born

1. On November 27, 2013, Vitalik Buterin released the “Ethereum White Paper”
2. Vitalik Buterin, the founder of Ethereum, released the first version of the white paper of Ethereum, introducing the token system of the Ethereum platform;
3. Summary

The whitepaper defined smart contracts, introducing the concept of Ether (ETH). It explained that Ether could serve as gas on the Ethereum network, requiring users to pay a certain gas fee when performing activities such as transferring funds or deploying smart contracts. Part of the gas fee would be rewarded to block validators (also known as miners). If the initiator of a transaction did not pay enough Ether, the transaction would not be executed, and if they paid an excess amount, the surplus would be refunded to the initiator’s wallet.

2014f: Phase 0.5 - Ethereum Sale

Ethereum Sale

July 22, 2014, 00:00:00 +UTC

Ether’s presale period lasted for 42 days and allowed purchases using Bitcoin.

Summary

The initial exchange rate was 1 Bitcoin for 2000 Ether, maintained for 14 days. Afterward, the rate linearly decreased until it reached 1 Bitcoin for 1337 Ether. The token sale concluded on September 2, 2014, with approximately $18 million in total sales, involving the purchase of over 60 million Ether. After completing the purchase, the received Ether could only be transferred after the launch of the Ethereum genesis block.

In addition to the over 60 million presale ETH, two other allocations were made. One allocation was for contributors to the early development of Ethereum, and the other was allocated to long-term research projects. Both allocations accounted for 9.9% of the presale ETH quantity.

In total, when Ethereum was officially issued, 72,002,454.768 ETH had been allocated.

Source: https://blog.ethereum.org/2014/07/22/launching-the-ether-sale

2015: Phase 1 - Frontier

On March 3, 2015, four important stages were announced in the article posted on Ethereum’s Official blog. According to the blog, some of Vitalik’s original thinking logic was as follows:

1. Frontier: Frontier’s main purpose during the launch process is to get mining operations and Ethereum exchanges running so that the community can launch their mining devices and start building a “live” environment where people can test DApps and earn Ether to upload their own software to Ethereum, making Ethereum fully stable among core developers and auditors;
2. Homestead: Frontier is like a closed beta version, and Homestead is a public beta version;
3. Metropolis (Metropolis): a complete and mature user interactive version, pursuing user experience;
4. Serenity: PoW to PoS

border

1. July 30, 2015 03:26:13 +UTC
2. Summary

Frontier is the original version of Ethereum, but there is very little that can be done on it. The release follows the successful completion of the Olympic beta phase. It is aimed at technical users, especially developers. Blocks have a fuel limit of 5,000 units. This “unlocking” period allows miners to begin operations and early adopters enough time to install clients.

Similar to the cold start of many Web 3.0 projects, “miners” will receive a reward of 5 Ethereum coins for every block they mine on the “Frontier” mainnet.

Frontier unlocking fork

1. September 7, 2015 09:33:09 +UTC
2. Block number: 200,000
3. Ethereum price: $1.24
4. Summary

The Frontier unlocking fork increases the limit of 5,000 units of gas per block and sets the default gas price to 51 gwei. This will enable the transaction - which requires 21,000 units of gas.

To ensure future hard forks to proof-of-stake, the concept of difficulty bomb is introduced. This concept is also known as TTD, stands for Total Terminal Difficulty, which is the sum of the difficulty of all previous blocks. When the accumulated mining difficulty value of the entire network reaches TTD, the ETH main network will activate the “difficulty bomb”. The “difficulty bomb” is a backdoor function that adjusts the difficulty of Ethereum. Ethereum’s PoW block time is not fixed, but the mining difficulty is dynamically adjusted according to the computing power of the entire network. In this way, the block time is fixed within a rough range. The deployment of the difficulty bomb uses a backdoor function to adjust the mining difficulty to a maximum value, so that no miner can produce blocks at this mining difficulty, thereby pushing miners to give up PoW. The PoW-POS conversion does not set a fixed block height, but stipulates TTD as the moment when Merge occurs. Part of the reason is to prevent someone from deliberately sabotaging the Merge process.

In disguise, it proves that Ethereum has long been determined to move from PoW to PoS.

2016: Phase 2 - Homestead

Ethereum’s first hard fork, after experiencing multiple security incidents, gradually improved some specifications of smart contracts.

homestead fork,

1. March 14, 2016 06:49:53 +UTC
2. Block number: 1,150,000
3. Ethereum price: US$12.50
4. Summary

Homestead Fork optimizes the creation process of smart contracts.

DAO fork

1. July 20, 2016 01:20:40 +UTC
2. Block number: 1,920,000
3. Ethereum price: US$12.54
4. Summary

This fork was an unplanned passive fork, stemming from an attack on Ethereum.

The DAO is a crowdfunding project launched by blockchain company [Slock.it] to provide a means of community funding for projects. Community users participate in voting by exchanging their ETH for DAO Token. If the crowdfunding is successful, they can receive a portion of the profit reward. The project completed a 28-day crowdsale in April 2016, raising a total of over 12 million ETH, accounting for almost 14% of the amount of Ethereum at the time. However, just 2 months later, hackers exploited a vulnerability in The DAO code and stole 3.6 million ETH from the fund pool.

This action was voted on by the Ethereum community. All Ethereum holders will be able to vote via transactions on the voting platform. The decision to fork received over 85% of the vote. Through the fork rollback, the ETH stolen by the hacker was recovered.

This fork moves funds from the contract in question to a new contract that has only one function: withdrawals. Anyone who has lost funds can withdraw ether from their wallet at a rate of 1 ether per 100 DAO tokens.

Some miners refused to fork because the DAO incident was not a flaw in the protocol. They later formed Ethereum Classic (ETC).

Tangerine Whistle fork

1. October 18, 2016 01:19:31 +UTC
2. Block number: 2,463,000
3. Ethereum price: US$12.50
4. Summary

The Tangerine Whistle fork is an optimization of the Denial of Service (DoS) attack suffered by the Ethereum network on September 18, 2016, which caused severe delays in transaction processing; it mainly solves emergency network health issues related to undervalued operating codes.

Spurious Dragon Fork

November 22, 2016 04:15:44 +UTC

1. Block number: 2,675,000
2. Ethereum price: US$9.84
3. Summary

Spurious Dragon Fork is further optimized for Denial of Service (DoS) cyber attacks, including:

-Adjust opcode prices to prevent future attacks on the network.

• Enable “blockchain weight loss” for blockchain status.

-Added replay attack protection.

2017: Phase Three - Metropolis

The main work of Metropolis is to fix some problems in the Ethereum network and prepare for the introduction of ZK-SNARKS.

The most influential event that occurred at this stage was the two halvings of block rewards: from 5ETH to 3ETH and then to 2ETH, which can be regarded as a transition period from PoW to PoS.

At this stage, we begin to consider user experience and how to smoothly transition from PoW to PoS in the future.

Byzantium upgrade

1. October 16, 2017 05:22:11 +UTC
2. Block number: 4,370,000
3. Ethereum price: US$334.23
4. Summary

The Byzantine fork paved the way for the introduction of ZK-Snark, which began to focus on user privacy and user experience.

-with the block mining rewards reducing from 5 Ethereum to 3 Ethereum.

-postpone the implementation of the difficulty bomb for a year.

-added the ability to call other contracts without changing state.

-added certain encryption methods to achieve Layer2。

2019: Phase 4 - Serenity

Ethereum is gradually maturing, and the consensus has shifted from PoW to PoS. User experience, security, zone decentralization, and scalability are the most important development directions of Ethereum.

Constantinople fork

1. February 28, 2019 07:52:04 +UTC
2. Block number: 7,280,000
3. Ethereum price: US$136.29
4. Summary

Reduce the block mining reward from 3 Ethereum to 2 Ethereum.

1. December 8, 2019 12:25:09 +UTC
2. Block number: 9,069,000
3. Ethereum price: US$151.06
4. Summary

-Optimized gas costs for specific operations in the Ethereum Virtual Machine.

-Improve resilience after denial of service attacks.

-Enable Layer 2 solutions based on “zero-knowledge concise non-interactive knowledge argumentation” and “zero-knowledge scalable transparent knowledge argumentation” to have better performance.

-Enable contracts to introduce more creative features.

2020: Muir Glacier Upgrade

1. January 2, 2020 08:30:49 +UTC
2. Block number: 9,200,000
3. Ethereum price: US$127.18
4. Summary

The Muir Glacier Fork delays the implementation of the difficulty bomb. Increasing the block difficulty of the proof-of-work consensus mechanism may raise the wait time for sending transactions and using decentralized applications, thereby reducing the usability of Ethereum.

Deploy staking deposit contract

1. October 14, 2020 09:22:52 +UTC
2. Block number: 11,052,984
3. Ethereum price: US$379.04
4. Summary

The Staking Deposit Contract introduces staking into the Ethereum ecosystem. Although it is a mainnet contract, it directly affects the release timeline of the beacon chain, which is an important part of the Ethereum upgrade.

Beacon chain genesis block

1. December 1, 2020 12:00:35 +UTC
2. Beacon chain block number: 1
3. Ethereum price: US$586.23
4. Summary

The Beacon Chain requires 16,384 accounts storing 32 staked Ether to ensure a safe launch. This happened on November 27, 2020, meaning the Beacon Chain started producing blocks on December 1, 2020.

The beacon chain plays the role of managing, supervising and verifying the blockchain network. The beacon chain uses a random method to select verifiers. Those who succeed in verification will be rewarded, but if there is malicious behavior, they will be punished.

After merging, the time units of a block will appear as slots and epochs. A slot is created every 12 seconds, and each epoch pack consists of 32 slots. An epoch is a fixed period of time at the end of which verifiers will be reassigned.

To become a validator and gain voting rights, users must stake at least 32 ETH.

Ethereum’s rule is that for each epoch, validators will be randomly assigned to 32 committees, ensuring that each committee consists of at least 128 validators. The system uses the random algorithm RANDAO to assign 1 validator for each period and also randomly selects a committee for this period. This validator is responsible for proposing blocks, while the committee is responsible for validating and voting on proposals. Once the vote is passed, a block will be generated and the proposer will receive the reward; otherwise, not only will the reward not be obtained, but the deposit will also be forfeited. The same goes for ordinary verifiers: if they follow the rules correctly, they are rewarded, while spoilers are punished. Once the 32 ETH deposit drops below 16 ETH, the validator’s eligibility will be terminated.

Berlin Upgrade 2021

1. April 15, 2021 10:07:03 +UTC
2. Block number: 12,244,000
3. Ethereum price: US$2,454.00
4. Summary

The Berlin upgrade optimizes gas costs for certain Ethereum Virtual Machine operations and adds support for multiple transaction types.

London upgrade

1. August 5, 2021 12:33:42 +UTC
2. Block number: 12,965,000
3. Ethereum price: US$2,621.00
4. Summary

The London upgrade introduced EIP-1559, which reforms the trading fee market. Continue to delay the implementation of the difficult bomb until its launch on December 1, 2021.

Aquila upgrade

1. October 27, 2021 10:56:23 +UTC
2. Period number: 74,240
3. Ethereum price: US$4,024.00
4. Summary

The Aquila upgrade is the first planned Beacon Chain upgrade. It adds support for “synchronization committees”—support for light clients, and adds penalties for validator laziness and slashable behavior as it progresses toward merges.

Arrow Glacier Upgrade

1. December 9, 2021 07:55:23 +UTC
2. Block number: 13,773,000
3. Ethereum price: US$4,111.00
4. Summary

The difficulty bomb delayed the generation of a total of 10,700,000 blocks until June 2022.

2022: Gray Glacier Upgrade

1. June 30, 2022 10:54:04 +UTC
2. Block number: 15,050,000
3. Ethereum price: US$1,069.00
4. Summary

Gray Glacier network upgrade delays the implementation of the difficulty bomb by three months. This is the only change introduced in this upgrade, which is essentially similar to the Arrow Glacier and Muir Glacier upgrades. Similar changes were made to the Byzantine, Constantinople, and London network upgrades.

Bellatrix upgrade

1. September 6, 2022 11:34:47 +UTC
2. Period number: 144,896
3. Ethereum price: US$1,558.00
4. Summary

The Bellatrix upgrade is the second planned Beacon chain upgrade, preparing the Beacon chain for the merger. It increases the penalty a validator receives for laziness and for engaging in slashable behavior to its full value. The Bellatrix upgrade also includes updates to the fork selection rules to prepare the Beacon Chain for merging and transitioning from the last Proof-of-Work block to the first Proof-of-Stake block. This includes making consensus clients aware of the total terminal difficulty of 587500000000000000000000.

Paris Upgrade (Merge)

1. September 15, 2022 06:42:42 +UTC
2. Block number: 15,537,394
3. Ethereum price: US$1,472.00
4. Summary

The Paris upgrade was triggered when the proof-of-work blockchain exceeded the total terminal difficulty of 58750000000000000000000. This happened on block 15537393 on September 15, 2022, and triggered the Paris upgrade at the next block. The Paris upgrade is a merger transition. The main function of Ethereum ends the proof-of-work mining algorithm and related consensus logic and starts the proof-of-stake. The Paris upgrade itself is an upgrade to the execution client (equivalent to the Bellatrix upgrade on the consensus layer), allowing the execution client to accept instructions from the consensus client connected to it.

2023: Capella upgrade

1. April 12, 2023 22:27:35 +UTC
2. Period number: 194,048
3. Beacon chain block number: 6,209,536
4. Ethereum Price: US$1,917.00
5. Summary

The Capella upgrade is the third major upgrade of the consensus layer (Beacon Chain), which enables staking withdrawals. Capella and Shanghai simultaneously upgraded the execution layer and enabled the staking withdrawal function.

This consensus layer upgrade allows stakers who have not provided withdrawal certificates for their initial deposits to provide withdrawal certificates to achieve withdrawals.

The upgrade also provides automated account scanning to continuously process any available reward payments or full withdrawals from validator accounts.

Shanghai upgrade

1. April 12, 2023 22:27:35 +UTC
2. Block number: 17,034,870
3. Ethereum Price: US$1,917.00
4. Summary

The Shanghai upgrade introduces staking withdrawals to the execution layer. The Shanghai upgrade coincides with the Capella upgrade, enabling the block to accept withdrawal operations so stakers can withdraw ether from the beacon chain to the execution layer.

1.2 Why can Ethereum become a deflationary model?

PoW is more like an early marketing tool for a startup company, with subsidies for stable famous songs (stable income for miners from mining), while PoS is more like equity and net issuance of ETH.

The Merge significantly changes Ethereum’s monetary policy. By eliminating miner rewards and converting them to staking rewards, it significantly reduces the issuance of new ETH tokens. This constitutes a decrease in daily ETH issuance of approximately 88.7%, equivalent to an annualized issuance rate of 0.52% of the total supply. Since the Gas fees under EIP-1559 are burned, the net issuance shows a deflationary trend.

There are two key changes:

1.2.1 EIP-1559 introduced in London upgrade: citing the cost burning mechanism

Reference article: Fuel and fees

1. Calculation formula of the old protocol: Gas fee = Gas units (limit) * Gas ​​price per unit

For the simplest on-chain transfer transaction, the Gas limit is fixed at 21,000, no matter how busy the chain is. So, as long as the Gas price and Gas limit are clear, we can know how much eth we spent for this interaction. The gas price will change with network congestion, and the gas limit will remain unchanged.

Suppose Alice needs to pay 1 ether to Bob. In the transaction, the fuel limit is 21,000 units and the price of fuel is 200 gwei.

The total cost is: Gas units (limit) Gas ​​price per unit, that is, 21,000 200 = 4,200,000 gwei or 0.0042 ether.

In order to give higher priority, scientists may set a very high gas fee on the fly, which results in confusing user experience that is difficult to predict.

1. The calculation formula of the new agreement: Gas fee = (Base fee + Priority fee) × Gas limit, and the increase in Base fee in the next block is up to 12.5%

The base fee is set by the protocol and will be burned directly, and the priority fee is the tip set by the user to be paid to the verifier.

For example, let’s say Jordan wants to pay Taylor 1 ether. An Ethereum transfer requires 21,000 units of gas and has a base fee of 10 gwei. Jordan paid 2 gwei as a tip.

The fee is 21,000 * (10 + 2) = 252,000 gwei (0.000252 ether).

When Jordan transfers money, 1.000252 Ether will be debited from Jordan’s account. Taylor’s account is increased by 1.0000 Ether. The validator receives a tip worth 0.000042 Ethereum. The base fee of 0.00021 Ethereum coins is burned.

1.2.2 Paris upgrade

First, the Constantinople hard fork reduced the mining reward from the original 3 ETH per block to 2 ETH. Then, The merge converted PoW into PoS, and the mining rewards (160,000eth/day) disappeared directly and were turned into staking rewards (1,600eth/day), with the issuance volume dropping sharply by 99%.

On September 15, 2022, after the Paris upgrade, Ethereum officially became deflationable.

Source: https://ultrasound.money/

Since the Merge, the total supply has been staked and burned, exceeding 300,000 Ether. With an annual burn rate of 981,000, an issuance rate of 723,000, the supply experiences deflation at a rate of 0.21% per year.

Source: https://ultrasound.money/

After Merge, Ethereum solved the problem of high energy consumption, and then focused on performance issues and cost issues. Layer 2 solved these two problems at the same time, so it became the most concerned track in the Ethereum ecosystem after Merge.

1.3 Ethereum’s future upgrade route

Vitalik Buterin presented a vision for the Ethereum roadmap, which divides upgrades into several categories based on their impact on the Ethereum architecture. This includes:

1. Merge: the upgrade involves the move from Proof-of-Work to Proof-of-Stake (completed)
2. Surge: the upgrade achieves over 100,000 TPS on Rollups
3. Scourge: the upgrades covers censorship resistance, decentralization, LSD, and MEV risks
4. Verge: the upgrade involves easier verification of blocks
5. Purge: the upgrade involves reducing the computational cost of operating nodes and simplifying protocol upgrades
6. Splurge: other

These upgrades are done in parallel, which means whichever part is developed faster, it may be upgraded first.

Source - Vitalik Buterin Twitter: https://twitter.com/VitalikButerin/status/1741190491578810445

2. What is Cancun Upgrade? What important EIPs have been implemented?

After the merger of Ethereum, the most important thing is to improve performance TPS, reduce gas fees, and make Ethereum close to a perfect application.

What kind of TPS and Gas Fee does Vitalik think Ethereum can achieve to be considered a qualified public chain?

1. For example: TPS reaches 100,000+. The average TPS of VISA is 2,000, with a peak of 4,000+; the average TPS of Paypal is 200; Alipay can reach 250,000 during rush hours.

This Ethereum upgrade is called the Dencun upgrade (Dencun+Cancun). The Cancun (Cancun, the city hosting Devcon) upgrade focuses on the Ethereum execution layer, and the Deneb upgrade focuses on the consensus layer.

The Cancun upgrade corresponds to the part of The Surge, with the goal of reaching 10+TPS.

According to Github, the Cancun upgrade will implement the following six EIPs, which we will focus on in the next section.

Source: https://github.com/ethereum/execution-specs/blob/master/network-upgrades/mainnet-upgrades/cancun.md

In addition to Pro-Danksharding (EIP-4844), the Cancun upgrade also includes EIP-6780, EIP-1153, EIP-6475, EIP-4788 and other improvement proposals.

2.1 Proto-Danksharding——EIP 4844

One of the most important things in the Cancun upgrade is to introduce Proto-Danksharding to make the transition to Ethereum’s complete sharding expansion, and introduce similar technologies in advance. The ultimate goal of Ethereum is to divide the main network into 64 slices to achieve 100,000+ TPS.

The background of Proto-Danksharding is that although the Rollup scheme significantly reduces transaction fees compared to the Ethereum main chain, it is not low enough yet. This is because the calldata that provides data availability on the Ethereum main chain still occupies a large cost (16 gas / byte). In the original idea, Ethereum proposed to provide 16MB of dedicated data space for each block in data sharding for Rollup to use, but the actual implementation of data sharding is still far away.

Currently, the data returned by Layer2 to Layer1 is stored in Calldata, and the data is permanently stored in the execution layer. In addition, for security reasons, Calldata requires gas for each step of execution in order to prevent network resource abuse.

After Ethereum completed the merger, it separated the consensus layer (responsible for PoS consensus) and the execution layer (execution of contract code). The job of the execution layer is to execute the data stored in Calldata (which can be considered a type of transaction).

The content contained in Calldata can be divided into two parts:

1. Execution Results
2. Transaction data - not much use. Once the verification is valid, it is of no use. It is enough to download the verification after a long enough time. It does not even need to be transmitted to the execution layer - EIP-4844 is to solve the problem of transaction data. This part accounts for more than 60% of Calldata’s entire cost.

Source: https://dune.com/optimismfnd/optimism-l1-batch-submission-fees-security-costs

In fact, as transaction data, there are only verification requirements and no execution requirements. There is no need to transmit it to the execution layer to increase the burden on the execution layer. It can only be stored in the nodes of the consensus layer.

For this purpose, EIP-4844 introduces a new transaction type called Blob (Binary Large Objects), which further subdivides transaction types. Unlike regular transactions, Blobs carry an additional data packet of around 125 KB. These Blobs exist only at the consensus layer, functioning like a cache package similar to an additional attached database. They are specifically designed as a separate data type (Blob) for the data transmitted back from Layer 2, distinct from Layer 1’s Calldata. Consequently, Blob data only needs to be accessible and verified by those in need within a certain timeframe, without requiring Layer 1 execution to handle the entire process. This significantly alleviates the burden on Layer 1.

Proto-Danksharding introduces Blobs with a size of 128 KB each, with each Ethereum block planned to include 3-6 Blobs (0.375 MB - 0.75 MB), gradually expanding to 64 in the future. In comparison, the current Ethereum block can accommodate less than 200 KB of data. The introduction of Blobs will significantly increase the amount of data Ethereum blocks can hold.

Source: https://etherscan.io/chart/blocksize

EIP-4844 is the advanced version of Danksharding, which aims to achieve temporary storage and retrieval of off-chain data through Ethereum nodes. Layer2 itself compresses off-chain data. Therefore, it is expected to enable L2 to carry more data per blockchain, reducing the trading fees by 10-100 times.

If Dencun successfully achieves the average target of 3 blobs per block after the upgrade, L2’s throughput will be increased by nearly 2 times. If the goal of adding 64 blobs to a block is finally achieved, the throughput of L2 will be improved by nearly 40 times.

Proto-Danksharding introduces EIP-1559 to further reduce blob costs

1. Different types of gas should have different base costs and maximum limits
2. Blob data costs are cheaper - Blobs do not compete for block space, the theoretical gas fee should be lower, and the Gas is cheaper, further reducing costs.

What if I want to see transaction data?

EIP-4844 also introduces the KZG (Kate-Zaverucha-Goldberg) commitment scheme as part of the blob verification and attestation generation process. KZG commitment is a polynomial commitment scheme that enables submitters to use a short string to commit to polynomials, and supports verifiers to use short strings to confirm stated commitments. Simply put, KZG can simplify the verification of large amounts of data into the verification of small cryptographic commitments.

Comparison before and after the introduction of Proto-Danksharding.

2.2 Others

EIP-6780 proposes to modify the SELFDESTRUCT opcode function to prepare for future applications of Merkle trees. In the future, through the application of Merkle trees, the storage efficiency of Ethereum will be greatly improved.

EIP-1153 allows the protocol to perform temporary storage by adding a transient storage opcode, thereby saving network gas fees.

EIP-6475 is a companion solution to EIP-4844, providing better readability and compact sequential order by introducing SSZ-encoded transaction types.

EIP-4788 aims to improve the structure of cross-chain bridges and staking pools.

3. Relevant data situation

3.1 Layer2 data situation

1. Total TVL

Total TVL has exceeded $20b

Source: https://l2beat.com/scaling/tvl

1. Layer2 TVL situation

Although Vitalik believes that ZK is the final solution for Rollup, in fact Arb+OP and other Op systems have exceeded 85%. At the same time, many projects are also trying the combination of OP+ZK and constantly iterating.

Source: https://l2beat.com/scaling/summary

1. Layer 2 Gas Fee situation

The handling fee of a few dollars for a single transaction may be considered a small amount for OG who are early exposed to web3.0, but it is still too expensive for Mass Adoption.

Source: https://l2fees.info/

1. Income

Select Layer1 and Layer2 for category, and select the four public chains in the picture for blockchain (Source: https://cryptofees.info/)

3.2 TPS

The earliest TPS of Ethereum is 108. Theoretically, the TPS of Layer 2 can exceed 100,000 transactions/second (TON). However, there are currently no applications of this level, which is also a cause for concern.

Source: https://chainspect.app/dashboard/tps

The current maximum real-time TPS on Layer 2 is less than 50.

Source: https://chainspect.app/dashboard/tps?tag=layer_2

4. Issues that remain to be resolved

1. Is Ethereum’s liquidity fragmented due to multiple different Layer 2s? Potential solutions are sequencer sharing, decentralized sequencers, etc.
   1. CM: It is not easy for money from chain A to go to chain B. The concept of Layer 2 is a service layer. Arb mainly focuses on derivatives led by Gmx. The market of Layer 2 is relatively small. At the beginning, the task of Layer 2 is to subdivide the business of Ethereum into Layer 2. The solution now is to solve it through the application layer. To solve the experience problem through cross-chain applications, there will inevitably be a separation of funds from the perspective of the chain, mainly due to security issues.
   2. DZ: It seems that Layer 2 has increased a lot recently? Are expectations for Layer 2 rising? Can the fee be reduced immediately after joining 4844? This will lead to some changes in the pattern, such as the movement of Tron’s USDT to Ethereum Layer 2.

Appendix—Common Knowledge

1. Network upgrades and forks

In the development process of the Ethereum protocol, network upgrades and forks have the same meaning. They are both changes to the Ethereum protocol and the addition of new rules (in the form of EIP), which can be planned or unplanned. But the meaning of a hard fork is different. It means that this network update is not fully backwards compatible and may even change the existing functionality of deployed contracts and invalidate some previous transactions.

2. Introduction to EIP/ERC

Main reference sources: https://eips.ethereum.org/EIPS/eip-1, namely EIP-1

2.1 EIP classification

EIPs can be divided into three broad categories:

Standards Track EIP: This type of EIP describes any changes that affect most or all Ethereum implementations, or any changes or additions that affect the interoperability of applications using Ethereum. Simply put, it is any EIP that changes all or most implementation details of Ethereum. It can be subdivided into the following categories:

1. Core: refers to changes that may lead to forks and require modifications to the consensus (such as EIP-5, EIP-101, etc.), as well as changes that are not necessarily consensus but may be related to the “core development” of Ethereum;
2. Networking: Refers to changes surrounding Ethereum communications devp2p (EIP-8) and the Light Ethereum Subprotocol, as well as proposed improvements to the Whisper and swarm network protocol specifications.
3. Interface: refers to modifications to Ethereum client API/RPC definitions and standards, improvements to language-level standards such as calling method names and contract ABI.
4. ERC: refers to application-level standards and conventions. It includes Token standards, name registration, URI schemes, account abstraction, etc.

Meta EIP (Meta Ethereum Improvement Proposal): This category of EIP revolves around changes to Ethereum’s processes (or events within the process), including modifications to processes, user guides, decision processes, development environments, and tools. Since these modifications require collective adherence from the community users, achieving community consensus is necessary.

Informational EIP (Informational Ethereum Improvement Proposal): This type of EIP is a non-standard improvement, not proposing new features but addressing design issues and offering opinions on general guidelines or information within the Ethereum community. It does not necessarily represent a consensus or recommendation from the Ethereum community.

Currently, the EIP repository has undergone the separation of ERC (Ethereum Request for Comment) and EIP. The proposal EIP-7329 suggests splitting ERC specifications from the EIP repository into a new repository, retaining only the core protocol EIP. Therefore, the current EIP repository focuses on standardizing Ethereum itself and protocols built on it, tracking past and ongoing improvements in the form of EIPs. The ERC repository, on the other hand, is dedicated to standardizing the Ethereum application layer, tracking improvements to application standards in the form of ERCs. ERC has given rise to several well-known standards such as ERC-20, ERC-721, ERC-1155, and others.

2.2 EIP review process

Idea - A pre-draft idea. This is not tracked in the EIP repository.

Draft - The first formal tracking phase in the development of an EIP. When properly formatted, the EIP is merged into the EIP repository by the EIP editor.

Review - The EIP author marks the EIP as ready and requests peer review.

Last Call - This is the last review window for the EIP before transfer to

Final - The EIP editor will assign

Last Call

It is the status and will set the review end date (

last-call-deadline

), usually after 14 days.

If necessary normative changes result during this period, the EIP will revert to

Review

.

Final - This EIP represents the final standard. The final EIP is in a final state and should only be updated to correct errata and add non-normative clarifications.

The PR that moves the EIP from the last invocation to the final invocation should not contain any changes other than status updates. Any content or editorial proposed changes should be submitted separately from and prior to this status update PR.

Stagnant

Draft

• in or

Review

or any EIP that has been inactive for 6 months or more

Last Call

will be moved to

Stagnant

. The author or EIP editor can move the EIP back by

Draft

or an earlier state to recover from. If not resurrected, the proposal may remain this way forever.

EIP authors are notified of any algorithm changes to their EIP status

Withdrawn - The EIP author has withdrawn the proposed EIP. This status is final and cannot be resurrected using this EIP number. If the idea is continued later, it will be considered a new proposal.

Living - A special state of an EIP that is designed to be continuously updated and does not reach a final state. The most famous of these is EIP-1.

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