Vitalik Buterin (Ethereum Co-founder) – Current and Future State of Ethereum (Mar 2019)
Chapters
00:00:00 Ethereum's Journey: From Open Finance to New Frontiers
Vitalik Buterin’s Role in Ethereum: Vitalik Buterin has consciously stepped back from decision making in Ethereum to allow the community to take ownership and make decisions independently. He focuses on Ethereum 2.0 protocol development and key research areas that contribute to Ethereum’s scalability and security. Buterin believes that Proof of Stake and sharding are more critical to Ethereum’s success than issuance reductions and protocol parameters.
Current Status of Ethereum: Buterin is surprised by the sheer scale of the Ethereum ecosystem and its widespread adoption by major corporations and organizations. He sees a return to the original vision of Ethereum as an open finance platform with the success of DeFi applications like Augur, Maker, and Uniswap.
Future Directions for Ethereum: Buterin expects new applications and use cases to emerge beyond open finance, but they may take longer to develop. Gaming is seen as a promising area due to its potential to showcase the utility of blockchain technology and attract a wider audience. Decentralized insurance is another area that has gained attention and could benefit from blockchain’s immutability and transparency.
00:07:24 Blockchain Gaming and Governance in the Ethereum Ecosystem
Blockchain Gaming: Blockchain gaming projects often propose a decentralized asset exchange platform, allowing users to trade in-game assets between different games. This approach aims to counter the closed ecosystems of big companies by enabling smaller developers to share network effects.
Ethereum Governance: Ethereum governance is often underrated because it lacks a catchy name and exciting concept like on-chain voting or immutability. Despite this, Ethereum governance has achieved concrete outcomes, such as implementing issuance reductions, moving towards ProcPOW, and handling technical hard forks efficiently. Ethereum’s governance process demonstrates flexibility and adaptability, exemplified by the rapid implementation of a hard fork during the 2016 DOS attacks and the quick delay of the Constantinople fork due to a bug.
00:12:11 Funding Ethereum Development in the Long Term
Ethereum Governance: Ethereum’s current governance system seems to be effective in making desired changes while avoiding harmful ones. However, it lacks dispute resolution, fund recovery, and decentralized funding for public goods. Decentralized funding is challenging due to the difficulty in distinguishing genuine public goods from projects that benefit specific entities. Vitalik Buterin believes Ethereum should focus on Layer 2 innovation and underfund public goods at the protocol level.
On-chain Governance: Vitalik Buterin is against on-chain governance due to the emergence of alternative platforms offering it as a feature. He argues that Ethereum can occupy a space between Bitcoin and platforms with activist governance by focusing on Layer 2 innovations. Once Ethereum has proof-of-stake, sharding, and scalable data availability, Layer 2 solutions become more feasible and the need for base layer modifications decreases.
Layer 2 Innovations: Vitalik Buterin emphasizes the importance of focusing innovation on Layer 2, which expands the possibilities for abstraction and scalability. Examples of Layer 2 innovations include high-level programming languages, zkrollups, and cross-charter transaction speeding proposals. With a scalable data layer, the need for base layer modifications reduces, allowing Ethereum to prioritize stability.
Redundant Complexity: Vitalik Buterin and Glenn Manning discuss the concept of redundant complexity in governance. Redundant complexity, as seen in common law, is characterized by overlapping concepts that evolve over time. This type of complexity is resilient compared to optimizing complexity, which involves intricate systems with many moving parts. Ethereum’s governance has moved towards redundant complexity, creating resilience against disruptive changes.
Ethereum Funding: Funding Ethereum development in the long term is a challenge, especially if the community desires a high level of public goods provision. The Ethereum Foundation is well-funded for the short term, but long-term solutions are needed. Voluntary donations could contribute to funding, and Vitalik Buterin proposes a norm for wallet providers to charge a small fee for transactions. Inflation funding could be an option if other methods are insufficient, but it would require careful consideration and mechanisms to prevent centralization.
00:24:35 Ethereum 1.X: Ensuring Main Chain Sustainability
Funding for Ethereum Research: There’s a need to raise funds for Ethereum research, but the amount and method of funding is still uncertain. Different levels of funding will have different trade-offs between intrusiveness to the status quo and the ability to find valuable research topics. The community is open to discussing the funding mechanism, but it may take time to find the right solution.
Gitcoin and CLR Matching: Gitcoin and CLR (Community-Led Research) matching are popular mechanisms for funding Ethereum research. The Ethereum Foundation has contributed $50,000 to Gitcoin’s CLR matching round two. The community has contributed $14,000 DAI to the Gitcoin Torch effort, which directs funds to projects that have received Gitcoin grants.
Ethereum 1.X and State Rent: Ethereum 1.X is an effort to ensure the long-term sustainability of the Ethereum main chain. One key aspect of Ethereum 1.X is keeping the state size in check. State rent is a proposal to charge a fee for storing data on the Ethereum blockchain. If a contract exceeds its storage limit and fails to pay the rent, it will be removed from the blockchain.
Stateless Clients: Stateless clients are a type of Ethereum client that doesn’t store the entire blockchain state. This makes them more lightweight and efficient, but also less secure. Some state rent proposals involve the use of stateless clients. Alexei’s fourth state rent proposal, which is still in development, will involve stateless clients.
Disruptive Nature of State Rent and Stateless Client Proposals: State rent and stateless client proposals aim to reduce Ethereum’s blockchain size. These proposals can be disruptive to existing applications, and community input is crucial. State rent may disrupt contracts that allow third-party transactions increasing storage keys. Stateless clients primarily disrupt contracts requiring dynamic state accesses.
Advantages of Reducing State Size: Scalability and efficiency gains by reducing blockchain size to 1-3 gigabytes or less. Potential to increase gas limit to 40 million, enhancing throughput. Alignment with Ethereum 2.0’s focus on state minimization and stateless client approaches.
Challenges of Reducing State Size: Node size is still a significant concern, especially for personal devices with limited storage. Fast syncing would break quickly with a higher gas limit due to increased blockchain size. Full nodes would require several terabytes of storage, impacting performance.
Strategies for Mitigating State Size Issues: Stop storing the full history on every node. Implement protocols for obtaining history beyond a short period. Focus on keeping state size in check to enable significant scalability gains.
Ethereum 2.0 Overview: Ethereum 2.0’s primary goals are proof-of-stake and sharding. Proof-of-stake shifts the consensus algorithm away from mining and computation. Sharding involves dividing the network into smaller, more manageable segments.
00:35:49 Ethereum 2.0 Roadmap: Sharding, State Transition, and Test Nets
Introduction of Proof-of-Stake: Vitalik Buterin proposes a transition from Proof-of-Work to Proof-of-Stake for Ethereum 2.0. Proof-of-Stake involves locking up ETH as a validation method, increasing efficiency and reducing issuance rates. This change allows for potential improvements such as a decrease in block time to around six seconds.
Ethereum 2.0 Roadmap Stages: The roadmap consists of multiple stages, with the initial stage (Phase 0) creating a standalone Proof-of-Stake chain. Phase 1 and Phase 2 introduce sharding to enhance scalability. Sharding involves randomly selecting a small portion of nodes to verify specific data, increasing throughput.
Phase 1 and Phase 2 Details: Phase 1 focuses on data sharding, enabling data throughput of approximately 2.8 megabytes per second. Phase 2 brings in state execution, contracts, web assembly, virtual machines, and other features within shards.
Progress and Timeline: Phase 0 is close to completion, and testnets are expected shortly. Phase 1 has a theoretically sufficient spec, but improvements and considerations are ongoing, such as a more efficient proof of custody game. Most clients are currently focused on Phase 0’s testnet stage, and Phase 1 development is ongoing.
Phase 0 Staking: In Phase 0 and Phase 1, staking requires sending ETH over a one-way bridge, with a minimum requirement of 32 ETH. Staking allows individuals to become validators and earn rewards.
00:38:56 Addressing Security Concerns of Proof-of-Stake in Ethereum 2.0
One-Way vs. Two-Way Bridge: Concerns have been raised about the potential risks of a one-way bridge in Ethereum 2.0, leading to the existence of two different assets: Ether on the 1.0 chain and beacon Ether on the 2.0 chain. Vitalik Buterin believes the risks of the one-way bridge are overestimated, especially with the introduction of post-withdrawal transfers. A two-way bridge would allow for the transfer of assets back to the 1.0 chain, but it poses challenges in verifying the ETH2 chain within the ETH1 chain. Implementing BLS12-381 as a precompile in ETH1.0 could enable the creation of a light client of the ETH2 chain as a smart contract within ETH1.0, potentially leading to a two-way bridge.
State Transition to Ethereum 2.0: The original idea for migrating the ETH1.0 chain to ETH2.0 was to transfer the entire state of ETH1.0 into a shard in ETH2.0. Vitalik Buterin favors this approach as the cleanest solution, eventually shutting down the Proof-of-Work chain and turning it into a contract verifying Merkle proofs of ETH1 state transitions. Keeping the Proof-of-Work chain running indefinitely is also a possibility, but it would require continued payment of Proof-of-Work rewards, which may not be sustainable once ETH2.0 is fully operational.
Proof-of-Stake Concerns: Some concerns have been raised regarding the potential for whales to manipulate proof-of-stake chains due to their large holdings. Vitalik Buterin believes that the most likely threat to proof-of-stake chains is not individuals buying up large amounts of coins, but rather hacking exchanges to gain control of significant amounts of cryptocurrency. Mitigating such attacks requires strong security measures to protect exchanges from hacks and ensuring that stolen funds cannot be easily liquidated.
00:46:24 51% Attacks and Privacy Considerations in Ethereum
Recovery from 51% Attacks: For finality reversions, the community can socially agree on the valid chain, making recovery relatively straightforward. In the case of 51% censorship attacks, honest validators can initiate a minority soft fork, creating a new chain and abandoning the compromised one. This process requires community coordination and is expensive for the attacker.
Proof of Stake vs. Proof of Work Attacks: Proof of stake attacks can be costly for attackers due to the risk of slashing or being forked out of the network, leading to loss of funds. Unlike proof of work, attackers cannot “spawn camp” a proof of stake chain by continuously attacking it.
Privacy on Ethereum: Eric Conner believes mainstream adoption of Ethereum requires privacy to protect users from financial doxing. Vitalik Buterin considers privacy important and acknowledges the need for addressing it. He suggests exploring both on-chain and layer-two solutions for privacy. On-chain privacy can involve implementing zk-SNARKs or other cryptographic techniques, while layer-two solutions can offer additional privacy features.
Privacy in Ethereum: * Vitalik Buterin does not believe privacy features should be built into layer one of Ethereum. * Different privacy schemes have different trade-offs, and he wants to avoid forcing a particular choice on users. * Buterin recently advocated for changes to wallets to generate a different address for each dApp interaction and for a proper mixer to send ETH anonymously.
Importance of Privacy in DeFi: * Eric Conner agrees with Buterin on the importance of privacy in DeFi. * He points out that the ability for anyone to analyze financial transactions is a major barrier to adoption.
Zcash, ZKSnarks, and Starks: * Conner mentions Zcash, ZKSnarks, and Starks as examples of promising privacy technologies.
Conclusion: * Buterin and Conner agree that privacy is a major issue that needs to be addressed in Ethereum and DeFi.
Abstract
The Evolution and Future of Ethereum: A Comprehensive Overview
Ethereum’s Path Forward: Vitalik Buterin’s Vision, Challenges, and Innovations
In the rapidly evolving world of blockchain technology, Ethereum stands out as a beacon of innovation and potential. Spearheaded by the influential Vitalik Buterin, Ethereum has undergone significant changes and is poised for a future filled with diverse applications, ranging from finance and gaming to governance. Buterin’s role, the platform’s current status, and its future endeavors are central to understanding Ethereum’s trajectory. Moreover, the underlying challenges and opportunities, including those in blockchain gaming and on-chain governance, paint a vivid picture of Ethereum’s dynamic landscape.
Vitalik Buterin’s Impact and Ethereum’s Current Landscape
Vitalik Buterin, a pivotal figure in Ethereum’s journey, has strategically stepped back from direct decision-making to foster community ownership. His current focus lies in the development of Ethereum 2.0 and research areas critical for its success, such as Proof-of-Stake and sharding. These technologies are vital for Ethereum’s long-term viability, overshadowing simpler measures like issuance reductions.
Ethereum’s ecosystem, now more expansive than Buterin initially envisioned, has shifted its focus from Web3 to open finance. Projects like Augur, Maker, and Uniswap are gaining traction, but Buterin anticipates a diversification beyond finance in the future, with gaming and decentralized insurance emerging as promising sectors.
Challenges and Opportunities Ahead
Scalability remains a major hurdle for Ethereum, but Ethereum 2.0 promises to address these concerns effectively. Buterin’s vision is not just technical; he sees Ethereum as a tool for empowering individuals and communities, providing control over data and assets. This vision extends to blockchain gaming, breaking down monopolies and fostering decentralized asset exchanges. Ethereum’s governance, while understated, has shown resilience and effectiveness, managing crises like the 2016 DOS attacks and adapting to unforeseen challenges, such as the Constantinople fork delay.
Blockchain gaming projects often propose a decentralized asset exchange platform, allowing users to trade in-game assets between different games. This approach aims to counter the closed ecosystems of big companies by enabling smaller developers to share network effects.
Ethereum governance is often underrated because it lacks a catchy name and exciting concept like on-chain voting or immutability. Despite this, Ethereum governance has achieved concrete outcomes, such as implementing issuance reductions, moving towards ProcPOW, and handling technical hard forks efficiently. Ethereum’s governance process demonstrates flexibility and adaptability, exemplified by the rapid implementation of a hard fork during the 2016 DOS attacks and the quick delay of the Constantinople fork due to a bug.
Governance and Long-term Viability
Buterin views Ethereum’s governance model as effective in achieving core objectives but acknowledges shortcomings in areas like dispute resolution. He expresses skepticism toward on-chain governance, preferring stability and innovation at Layer 2. Funding Ethereum’s development is another challenge, with potential solutions ranging from voluntary donations to inflation funding. The need to balance centralization and decentralization in funding mechanisms is crucial, with models like Gitcoin’s CLR gadget offering promising solutions.
Ethereum’s current governance system seems to be effective in making desired changes while avoiding harmful ones. However, it lacks dispute resolution, fund recovery, and decentralized funding for public goods. Decentralized funding is challenging due to the difficulty in distinguishing genuine public goods from projects that benefit specific entities. Vitalik Buterin believes Ethereum should focus on Layer 2 innovation and underfund public goods at the protocol level.
Vitalik Buterin is against on-chain governance due to the emergence of alternative platforms offering it as a feature. He argues that Ethereum can occupy a space between Bitcoin and platforms with activist governance by focusing on Layer 2 innovations. Once Ethereum has proof-of-stake, sharding, and scalable data availability, Layer 2 solutions become more feasible and the need for base layer modifications decreases.
Funding Ethereum development in the long term is a challenge, especially if the community desires a high level of public goods provision. The Ethereum Foundation is well-funded for the short term, but long-term solutions are needed. Voluntary donations could contribute to funding, and Vitalik Buterin proposes a norm for wallet providers to charge a small fee for transactions. Inflation funding could be an option if other methods are insufficient, but it would require careful consideration and mechanisms to prevent centralization.
State Rent and Stateless Clients: Paths to Scalability
Ethereum’s scalability solutions are multifaceted. The State Rent proposal aims to manage state size by charging for contract storage keys, incentivizing efficient storage use. In contrast, the Stateless Client approach offloads storage responsibilities, reducing network burden but disrupting existing applications. Both strategies offer significant scalability gains and are seen as necessary steps towards Ethereum 2.0.
Ethereum 2.0: A New Era
Ethereum 2.0 marks a paradigm shift with its adoption of Proof-of-Stake and sharding. This transition promises higher transaction throughput, improved scalability, and environmental sustainability. The phased implementation of Ethereum 2.0, from creating a PoS chain in Phase 0 to introducing state execution in Phase 2, highlights the platform’s methodical progression. The ongoing development of one-way and two-way bridges between ETH 1.0 and ETH 2.0, and the potential verification of ETH2 blocks in ETH1.0, demonstrate Ethereum’s commitment to seamless integration and security.
Privacy: A Core Consideration
Privacy remains a critical aspect for Ethereum’s mainstream adoption. Buterin emphasizes the importance of diverse privacy schemes and the challenges they pose. Proposed solutions like generating different addresses for each dApp interaction and implementing mixers for anonymous transactions are steps towards addressing these privacy concerns.
Looking Ahead with Optimism
Vitalik Buterin’s optimism about Ethereum’s future is evident. He stresses the importance of continuous experimentation, research, and collaboration for the platform’s growth. Ethereum’s journey, marked by both challenges and achievements, showcases its potential to revolutionize various industries. As it moves forward, balancing innovation with stability and addressing key concerns like funding and privacy, Ethereum remains at the forefront of blockchain technology’s transformative power.
Additional Insights and Developments:
Funding for Ethereum Research:
– The community is actively discussing various mechanisms for funding Ethereum research, recognizing the need for long-term support.
– The Gitcoin platform has been instrumental in facilitating community-led research grants, with significant contributions from the Ethereum Foundation and individual donors.
State Rent and Stateless Clients:
– The State Rent proposal, aimed at reducing blockchain size, has generated discussion about its potential impact on existing applications.
– Stateless clients, which reduce node storage requirements, offer scalability benefits but require careful consideration of trade-offs, including potential disruptions to certain contracts.
Ethereum 2.0 Roadmap:
– The phased implementation of Ethereum 2.0, with its focus on proof-of-stake and sharding, is progressing steadily.
– Phase 0, which introduces the proof-of-stake consensus mechanism, is nearing completion, with testnets underway.
– Phase 1 and Phase 2 will bring data sharding and additional features, significantly enhancing the platform’s scalability and performance.
Privacy and Scalability:
– Privacy remains a key consideration for Ethereum’s mainstream adoption.
– Ongoing research and development efforts are exploring various approaches to address privacy concerns, including zero-knowledge proofs and ring signatures.
– Scalability solutions, such as state rent, stateless clients, and layer-2 protocols, are being actively pursued to improve transaction throughput and reduce network congestion.
Vitalik Buterin and Eric Conner Discuss Ethereum 2.0, One-Way vs. Two-Way Bridge, State Transition, and Proof-of-Stake Concerns:
– Concerns about the potential risks of a one-way bridge in Ethereum 2.0 have been addressed.
– Buterin believes the risks of the one-way bridge are overestimated, especially with the introduction of post-withdrawal transfers.
– The original idea for migrating the ETH1.0 chain to ETH2.0 was to transfer the entire state of ETH1.0 into a shard in ETH2.0, which is favored by Buterin.
– Some concerns have been raised regarding the potential for whales to manipulate proof-of-stake chains due to their large holdings, but Buterin believes hacking exchanges is a more likely threat.
Vitalik Buterin on Ethereum Security and Privacy:
– Recovery from 51% attacks is possible through social agreement on the valid chain and community coordination.
– Proof of stake attacks can be costly for attackers due to the risk of slashing or being forked out of the network.
– Privacy is important for mainstream adoption and can be addressed through on-chain and layer-two solutions.
Vitalik Buterin’s Thoughts on Privacy in Ethereum:
– Buterin does not believe privacy features should be built into layer one of Ethereum, preferring different privacy schemes with their own trade-offs.
– Buterin recently advocated for changes to wallets to generate a different address for each dApp interaction and for a proper mixer to send ETH anonymously.
– Eric Conner agrees with Buterin on the importance of privacy in DeFi, as the ability for anyone to analyze financial transactions is a major barrier to adoption.
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