Ethereum After Shapella: A Rollup-centric Era To Shine

8 min readApr 13, 2023

The long-awaited Ethereum Shapella upgrade was officially triggered on April 12 at 22:27 pm (UTC) in the 194,048th epoch and finalized at 22:42 pm (UTC). With this, the world’s second-most popular cryptocurrency has successfully completed the final step of its transition to Proof of Stake (PoS).

Shapella is a portmanteau word of “Shanghai” and “Capella”，where Shanghai is the name of the fork of the execution layer client and Capella is the name of the fork of the consensus layer client. For the Shanghai upgrade to take effect, a simultaneous upgrade to the Beacon Chain must take place named Capella, so conceptually the full hard fork should be called Shapella and not just a separate reference to the Shanghai upgrade.

Why is it necessary to do Shapella Upgrade?

Shapella is the first major upgrade since the Ethereum Merge in September 2022, with Shapella essentially being the final completion of the Merge. Due to the complexity of the Merge upgrade, the activation of Staking Withdrawals was delayed until now. Shapella upgrade is the perfect conclusion to the Merge, bringing Ethereum closer to being a fully functional PoS system.

Shapella update will focus on three key issues: including fundamental changes to Ethereum in the EVM functionality, the enablement of staking withdrawals on Beacon Chain, and the reduction of Gas fees in Layer 2. The most attention has been paid to the withdrawal functionality (EIP-4895). Shapella marks the end of an undefined lock-up period for $ETH staking, and users will be able to freely stake, unstake and withdraw $ETH.

According to Beaconcha.in, as of writing, over 18 million $ETH have been staked , representing over 15% of the total $ETH supply. In theory, all of these $ETH will be unlocked after the Shapella upgrade. However, the upgrade itself has various mechanisms in place (such as enabling phased verifier withdrawals) that could prevent a large influx of ETH supply into the market in the short term.

Additionally，the successful completion of Shapella for Ethereum is fundamentally positive and more investors are expected to flock to the network once it is proven that they can easily withdraw their invested funds. As $ETH staking ratio gradually rises to 40–60% (most other mainstream L1 networks have staked above 40%), the security of the Ethereum network will also be enhanced, further cementing its core position as L1.

What’s Next After Shapella？

Shapella’s successful upgrade ended the process of transforming Ethereum to PoS, but Ethereum’s vision goes much further. Vitalik Buterin, the founder of Ethereum, proposed a vision for the Ethereum roadmap on 5 November 2022, outlining six main lines of development for Ethereum: The Merge, The Surge, The Scourge, The Verge, The Purge, and The Splurge.

Shapella is a historical task from The Merge phase, and many of the EIPs have been removed from Shapella in order to ensure that the ETH withdrawal schedule is not delayed. We expect to see the implementation of these EIPs in the next major upgrade after Shapella, the “Cancun Upgrade” (Cancun Upgrade is the name of the hard fork of the execution layer similar to the Shanghai Upgrade, and the name of the consensus layer is Deneb).

It is also clear from this roadmap that the next phase of Ethereum is The Surge, with the core goal of significantly improving Ethereum’s network performance to achieve 100,000 TPS (currently Ethereum’s TPS is between 10–20). Specifically, the network will be made more scalable by introducing technologies or products such as Sharding and Rollups. The details of the next hard fork of Ethereum, the Cancun upgrade, have not yet been finalized, but EIP-4844 (also known as Proto-Danksharding) has become the first EIP to be written into the upgrade specification, and it is certain that the issues surrounding EIP-4844 will be the subject of the next upgrade. It is certain that the issues surrounding EIP-4844 will be at the heart of the next upgrade.

Why is EIP-4844 a Rollup-Centric Sharding Scheme?

To understand EIP-4844, it is necessary to start with the original sharding proposal for Ethereum. Sharding was proposed over 5 years ago，splitting the Ethereum network into “shards” was proposed as a way to theoretically increase the amount of activity Ethereum could process. The basic principle is similar to adding lanes to a highway.

However, the implementation of sharding proved to be a complex and time-consuming project. In the meantime, some third-party teams (such as Arbitrum and Optimism) introduced Layer 2 Rollup technology that matured and achieved better scaling results. There is a growing consensus in the Ethereum community that rollups are in the short and medium term, and possibly in the long term, the only trustless scaling solution for Ethereum. As a result, sharding priorities shifted and Ethereum’s developers moved to a new Rollup-centric roadmap.

Danksharding is the new sharding design proposed for Ethereum, which is a Rollup-centric sharding scheme named after Dankrad Feist, the Ethereum researcher who first proposed it. Danksharding no longer follows the traditional “Sharding” model designed to split the blockchain into multiple parts. Shard chains are no longer part of the roadmap. Instead, Danksharding attempts to implement a model known as “data-sharding”，which works using “data availability sampling”, a technique that allows nodes on Ethereum to verify large amounts of data just by sampling a few pieces of it. Essentially, it allows Ethereum to process larger quantities of data than ever before.

Proto-danksharding (aka EIP-4844) is a simple implementation of the full version of Danksharding. By official definition, Proto-danksharding is intended to implement most of the logic and “scaffolding” (e.g., transaction formats, verification rules) that make up a full Danksharding spec, but not yet actually implementing any sharding. In a proto-danksharding implementation, all validators and users still have to directly validate the availability of the full data.

The main feature of Proto-danksharding is the introduction of a new type of transaction called blob-carrying transaction. A blob-carrying transaction is like a regular transaction, except it also carries an extra piece of data called a blob. Blob allows each block to carry 1MB-2MB of data. Validators and clients still need to download the full blob data, which is stored on the consensus layer (Beacon chain) rather than the execution layer, and is expected to be automatically deleted after a fixed time period (1–3 months).

Essentially, Proto-danksharding introduces ephemeral data storage. Because the data does not need to be stored by the network forever, it will be cheaper to use than on-chain storage (such as CALLDATA currently used by rollups). Rollups (L2) can use this storage to post transaction data or proofs back to Ethereum mainnet (L1), which is cheaper and more user-friendly. In addition to introducing blob-carrying transactions, EIP-4844 will also implement execution-layer logic, verification rules, multi-dimensional fee markets, and other system changes required for full Danksharding in the future.

Overall, EIP-4844 is designed entirely for Rollup and is intended to help the L2 Rollup solution further reduce costs and increase throughput, while paving the way for Danksharding (with the goal of expanding the blobs attached to blocks from 1 in Proto-Danksharding to 64 in full Danksharding). Ethereum blocks can currently carry 50–100KB of data, and with the implementation of proto-danksharding they will be able to carry 1MB-2MB. While this is less than the 16MB-32MB predicted under full Danksharding, the 10x increase in data availability should significantly reduce the cost of using rollups.

How far is it?

While full Danksharding is still several years away, the pre-release Proto-Danksharding should arrive relatively soon. The cryptographic scheme required to implement (proto)-danksharding, KZG Commitments, is still open and has already attracted over 80,000 contributors. KZG Commitments is the polynomial commitment scheme that best meets the criteria for data availability sampling. And KZG will serve as the core cryptographic foundation for (proto)-danksharding.

KZG stands for Kate-Zaverucha-Goldberg — the names of the three original authors. A KZG ceremony is a way for many people from across the Ethereum community to generate a secret random string of numbers together that can be used to verify the data that is compatible with zero-knowledge techniques used by some rollups and eventually other parts of the Ethereum protocol. The detailed cryptographic mechanism can be found in the paper.

The EIP for Proto-Danksharding is mature and has been written into the Cancun upgrade. The EIP specifications have been agreed，prototypes have been implemented on some clients and are currently being tested and prepared for production. The next step is to implement these changes on the public test network.

EIP-4844 is widely supported by Ethereum core developers, optimistic rollup and zk-rollup teams, dapp developers, cross-chain bridge implementers, exchanges, and more. The EIP-4844 is perhaps the most community effort that has been accumulated so far (other than the Merger). That’s why the next post-Shapella upgrade (Cancun+Deneb) will focus on EIP-4844. The implementation of EIP-4844 will significantly reduce transaction costs for rollups users，stimulate the continued prosperity of the Ethereum L2，and more importantly, will set the technical stage for subsequent Danksharding to achieve data sharding and further scaling visions.

Cancun upgrade also includes a number of EIPs in CFI (Considered for Inclusion) status, most notably EOF (EVM Object Format), which was previously removed from Shanghai upgrade. Essentially, EOF is a series of EIPs to the EVM that will allow version control and the running of multiple sets of contract rules at the same time. This makes it easier to introduce or remove features and could be a good prelude to the future introduction of larger features such as Account Abstraction.

The exact timing of Cancun upgrade has not yet been finalized and is planned for the second half of 2023. The success of the 2022 Ethereum Merger (a highly complex and radical upgrade) has already proved to us that this large decentralized system with a market capitalization of over $200 billion is capable of self-improvement. Developers are leaving no stone unturned to build this ecosystem and turn Ethereum into what we want it to be.

About DFG

Digital Finance Group (DFG) is a global blockchain and cryptocurrency investment firm founded in 2015 with assets under management of over $1 billion. Through a wide range of sectors within the blockchain ecosystem such as Web3.0, CeFi, DeFi, NFTs, the Polkadot ecosystem.

Investments include Circle, Ledger, Coinlist, FV Bank, Astar, ChainSafe and over 100 more. DFG intends to create value, through analytical research, based on the most impactful and promising global blockchain and Web3.0 projects that will bring a paradigm shift to the world.

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References:

https://www.eip4844.com/

https://eips.ethereum.org/EIPS/eip-4844

https://notes.ethereum.org/@vbuterin/proto_danksharding_faq#Proto-Danksharding-FAQ

https://twitter.com/VitalikButerin/status/1588669782471368704

https://notes.ethereum.org/@launchpad/withdrawals-faq

https://blog.ethereum.org/2023/03/28/shapella-mainnet-announcement

https://ethereum-magicians.org/t/cancun-network-upgrade-meta-thread/12060

https://ethereum.org/zh/roadmap/danksharding/

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

https://www.coindesk.com/L2/2022/06/08/scaling-ethereum-beyond-the-merge-danksharding/