Ethereum’s Future:
Vitalik Buterin believes Ethereum has many possible visions and will become a substrate for various applications once its scaling issues are resolved.

The Merge:
Vitalik shares his reaction to the merge, expressing relief and excitement after eight years of anticipation.

Energy Efficiency:
Vitalik emphasizes the green benefits of Proof of Stake, highlighting its energy efficiency compared to Proof of Work.

Proof of Stake’s Journey:
Vitalik describes the lengthy journey to Proof of Stake, acknowledging the challenges and complexities involved in its development.

Ethereum’s Roadmap:
The discussion delves into Ethereum’s technical roadmap, including the merge, splurge, purge, and verge milestones.

Staking Centralization Concerns:
Vitalik addresses concerns about staking centralization, acknowledging the importance of decentralization and exploring potential solutions.

Censorship Resistance:
Vitalik discusses Ethereum’s future censorship resistance, emphasizing the need for a robust network and social consensus.

AI and the Future:
The conversation explores the intersection of crypto and AI, with Vitalik sharing his insights on the potential impact of AI and his recent trip to Silicon Valley to meet experts in the field.

AI’s Pace of Development:
Vitalik expresses his belief that advanced AI may be closer than previously anticipated, highlighting the rapid pace of technological development.

Vitalik’s Feelings on the Merge:
Vitalik expresses his happiness about the Merge’s completion and the successful transition to Proof of Stake (PoS). He notes that the transition happened more smoothly than expected and is relieved that doubts about PoS’s feasibility are now put to rest.

Next Target for the Trolls:
Vitalik speculates that trolls will shift their focus to either criticizing PoS or claiming that sharding will never be achieved.

Arguments Against Sharding:
He mentions arguments that trolls might use to support their claim, such as the complexity of peer-to-peer networking for data availability sampling and the possibility of Ethereum facing scalability bottlenecks.

Confidence in the Ethereum Ecosystem:
Vitalik emphasizes that betting against Ethereum’s ability to produce technology has not been successful in the past, given the ecosystem’s track record of innovation.

Trolls’ Focus on Ideology:
He predicts that trolls will likely stick to the ideological argument that PoS is inherently bad rather than focusing on technical issues.

Vitalik’s Perspective on the Merge:
Vitalik shares his surprise at how smoothly the Ethereum merge went, as previous testnet merges had encountered issues. He highlights that the success of the mainnet merge can be attributed to resolving bugs related to settings rather than implementation, as testnets often have unusual settings and connection challenges.

Waiting for the Merge:
Vitalik describes the anticipation and excitement during the final moments leading up to the merge, with many people gathered on a Zoom call to witness the event. The countdown to the terminal block surpassing the total terminal difficulty threshold was followed by the first Proof-of-Stake block, triggering celebrations among the community.

The World’s Reaction to the Merge:
Vitalik discusses the mainstream media’s focus on the energy reduction narrative and the difficulty for critics to argue in favor of Proof-of-Work from an environmental perspective.

Climate Change and Energy Consumption:
Vitalik expresses his moderate view on climate change, acknowledging its severity but not considering it an existential risk. He emphasizes the importance of moving beyond carbon-heavy practices and sees the switch to Proof-of-Stake as a positive step. Vitalik critiques the arguments presented by Proof-of-Work proponents, suggesting they are often self-serving and lack neutrality. He compares these arguments to the hypothetical situation of a Philip Morris representative claiming the company’s ethical contributions to lung cancer research. Vitalik emphasizes that zooming out and considering the long-term impact of energy consumption is more meaningful than focusing on specific, isolated situations.

Proof-of-Work (PoW) Efficiency Concerns:
Vitalik Buterin questions the practicality of optimizing PoW hardware usage by only operating during specific times with spare electricity, due to the competitive nature of PoW. The significant cost of hardware and the need for continuous operation limit the feasibility of this approach.

Environmental Benefits of the Merge:
The transition to proof-of-stake (PoS) reduces Ethereum’s energy consumption, which aligns with the growing concerns about environmental sustainability. Positive reception from corporate and government entities that were previously hesitant due to the environmental impact of PoW.

Disagreement with Centralized and Authoritarian Views:
Vitalik disagrees with the notion that environmental concerns are solely associated with centralized organizations like the World Economic Forum. He highlights the existence of a diverse range of individuals and organizations that care about both environmental sustainability and decentralized, open-source technologies like Ethereum.

Diverse Perspectives within the Crypto Community:
Vitalik believes that the crypto community encompasses a wide spectrum of viewpoints regarding environmental concerns and the optimal approach to blockchain technology. He emphasizes the need to avoid binary thinking and acknowledges the existence of individuals who value both decentralization and environmental responsibility.

Impact of the Merge on Global Electricity Consumption:
Estimates suggest that the Merge will reduce global electricity consumption by approximately 0.2%, which is comparable to the energy usage of small countries like Austria or Singapore. However, Vitalik acknowledges that this reduction is likely temporary as miners may divert their efforts to other proof-of-work blockchains.

Long-Term Energy Savings Potential:
In the medium to long term, the reduced profitability of GPU-style proof-of-work is expected to decrease the amount of effort and energy dedicated to it. If Ethereum’s adoption and usage continue to grow, the potential energy savings could be significantly larger than the initial 0.2% reduction.

Historical Challenges in Ethereum’s Transition to PoS:
Vitalik acknowledges the lengthy and challenging journey towards the Merge, including dead ends and setbacks. He emphasizes the importance of perseverance and dedication in overcoming obstacles in complex technological developments.

Original Roadmap:
Casper FFG concept: Proof-of-Stake system as a smart contract on top of Proof-of-Work chain. Step 1: Get Casper FFG running. Step 2: Separate sharding chain and slow migration.

Pre-2017 Roadmap:
Start a new chain from scratch. Retire the existing chain and demand application migration.

Pragmatic BLS Aggregation:
Justin Drake’s proposal in mid-2018. Heavy use of BLS aggregation to support more validators and decentralization. Simplified architecture and aided development. Necessitated a new chain instead of a smart contract implementation.

Original Concept:
In 2018-19, Ethereum explored the idea of execution environments, similar to roll-ups, with a minimal execution layer. The existing Ethereum system would become one of these roll-ups, possibly upgrading from EVM to WebAssembly.

Shift in Ambition:
Over time, the ambition for the merge decreased due to various factors, including the success of EVM-compatible ETH killers. The focus shifted to a more realistic and simplified design for the merge, dropping dreams of major reforms.

Compromises and Challenges:
Ethereum clients still process the pre-merge chain, despite the desire to use the merge as a reset opportunity. This issue will be addressed with EIP-4444, but it highlights the challenges in implementing ambitious changes.

Long-Term Considerations:
The question remains whether the current design is the best long-term form of proof of stake for Ethereum. It’s unclear if more research and time would have led to a different or better transition strategy.

Mistakes and Challenges of the Merge:
Vitalik acknowledges that the transition to proof-of-stake (PoS) could have been optimized, with a simpler PoS design and earlier implementation being a potential improvement. The merge’s format is still seen as excellent, serving as a model for other Proof-of-Work chains to transition to PoS.

Hindsight on Layer-2 Scaling:
Vitalik expresses regret over the time spent on exploring scaling solutions like state channels and plasma, which could have been allocated to developing rollups sooner. He recognizes the utility of state channels in specific use cases but acknowledges that they were not the ideal solution for general-purpose Ethereum scaling.

Ethereum’s Trajectory and Crypto’s Relevancy:
Vitalik highlights the roadmap from last year, referencing the Merge, Surge, Verge, Purge, Splurge roadmap, to assess Ethereum’s progress. The Merge is complete, with post-merge hard fork withdrawals and distributed validators still in progress. Work on single secret leader election and single SWAT finality is ongoing, aiming to improve consensus. Vitalik emphasizes the importance of expanding Ethereum’s use cases beyond payments and finance to include general-purpose applications. He believes crypto’s relevance will continue to grow as it becomes more integrated into real-world applications.

The Merge:
The Merge is the transition to proof-of-stake and is almost complete. Vitalik emphasizes that despite being close to completion, there are still some costs and trade-offs to consider, such as compromises to the 32 ETH validator balance property or the level of economic finality.

The Surge:
The focus has shifted from 4488 to 4844, which is fully specified and awaiting implementation. Vitalik introduces the concept of “Dank Sharding,” which moves away from discrete shards and towards a more amorphous concept of data blobs. Short-term call data expansion has been de-prioritized, while basic sharding and data availability sampling remain significant research areas.

The Verge:
Verkle trees have seen progress in implementation, but the transition from the existing tree structure to a Verkle tree presents engineering challenges. The prioritization of scalability has led to the deprioritization of the Verge, but its importance in statelessness remains.

The Purge:
History expiry (EIP4444) is making progress, but self-destruct needs to be addressed. State expiry has been deprioritized due to proposer-builder separation and statelessness reducing the number of actors holding the entire state. The order of operations for the Purge has been reworked, allowing for more freedom in figuring out other aspects of the roadmap.

The Splurge:
The Splurge consists of additional enhancements and improvements to the Ethereum protocol. Vitalik emphasizes that items in the Splurge bucket are not less important than those in the other categories. Account abstraction, PBS/MEV stabilization, EVM improvements, and Zk-snarking are highlighted as valuable aspects of the Splurge. Zk-snarks are seen as a technological breakthrough comparable to blockchains, offering benefits such as easier verification on-chain.

ZK-SYNC:
ZK-SYNC is an Ethereum Layer 2 network that combines zero-knowledge rollups with the Ethereum virtual machine, enabling developers to build scalable and secure Web3 projects.

Economics of Staking:
Potential changes to Ethereum’s staking economics include faster deposit and withdrawal queues, reduced incentives for stake pools, and redistribution of MEV revenue to all validators. System requirements for staking nodes may decrease over time, allowing for more decentralized and accessible staking, potentially even on mobile phones. BLS signature aggregation could reduce the minimum ETH deposit size.

Single Slot Finality:
Single slot finality would allow validators to stake and send messages during every individual slot, increasing the security and reducing the finalization time to 32 seconds. Two approaches to single slot finality are super committees and global validator set, each with their own benefits and drawbacks. The decision between these approaches involves trade-offs between protocol simplicity, security, and the ability to stake with smaller amounts of ETH.

Centralization of Stake:
Concerns exist about the centralization of stake in large staking pools like Coinbase and Kraken, potentially compromising Ethereum’s security guarantees. The roadmap can mitigate this by reducing the minimum ETH deposit size, allowing more individuals to participate in staking and decentralize the network.

Lido’s Decentralization:
Lido is not a single centralized actor. It distributes stake among a significant number of sub-validators, each with a small percentage of the stake. There is no single owner or admin with the ability to control all Lido validators.

Short-Term Risk Assessment:
Current centralized staking providers, including Coinbase and Kraken, are reputable entities with a vested interest in Ethereum’s success. The risk of malicious activity in the short term is low due to their positive intentions.

Long-Term Decentralization Solutions:
Enable withdrawals to allow stakers to easily move their stake between providers. Implement a feature that allows stakers to transfer staking power immediately, reducing the risk of slashing by previous providers. Upgrade Proof-of-Stake to make it easier for solo staking and allow for quick stake movement between pools and providers.

Comparison to Bitcoin Proof-of-Work:
Bitcoin’s decentralization is also limited, with a small number of mining pools controlling a majority of the network. The ability to switch pools quickly in Proof-of-Work is not as significant as perceived, as withdrawals in Proof-of-Stake will provide similar flexibility.

Overcoming Current Proof-of-Stake Weaknesses:
The weaknesses in the current Proof-of-Stake system are not permanent and will be addressed through upgrades. Proof-of-Stake can be improved to allow for easy start and stop of staking, increasing decentralization.

Overall Decentralization Improvement:
Over time, Proof-of-Stake will become more decentralized, approaching a system where staking can be easily adjusted. The current centralized nature of staking is a temporary issue that will be resolved with protocol upgrades.

Decentralization:
Post-merge Ethereum exhibits superior decentralization compared to proof-of-work Ethereum and Bitcoin, considering solar stakers and Delito’s internal decentralization.

51% Attack Recovery:
Proof of Stake offers enhanced recovery from 51% attacks. Social and partial automated recovery options are available, unlike in Proof of Work, where 51% attacks can be devastating. Practicality of recovery is stronger in Proof of Stake, minimizing the impact of stake attacks.

Censorship Resistance:
Censorship resistance remains a crucial issue with the transition to MEV-boost architecture. Centralized actors responsible for block production pose a censorship risk.

Mitigations:
Transaction inclusion lists (CR lists) allow validators to mandate the inclusion of specific transactions in outsourced blocks. Decentralized builders, SGX builders, MPC, and SNARK builders are long-term strategies to enhance validator autonomy and transaction control. Fostering competition in builder and relayer markets promotes decentralization.

Market Analysis:
Flashbots relay dominates MEV boost blocks, but other builders and relayers contribute significantly.

Relays and Builders:
Vitalik believes that the concept of relays will disappear with the implementation of in-protocol PBS (Proposer-Builder Separation). Relays are publicly known entities that validators must consciously choose, creating a trust-based relationship. In-protocol PBS will eliminate the trust component, and relays will be replaced solely by builders.

Builders:
Builders, unlike relays, do not have public identities and do not require validators to make conscious choices. Some validators may choose to refuse blocks from specific builders, but this will be an individual decision.

OFAC Compliance:
Certain block builders may choose to be OFAC compliant, while others may not. Validators will have the option to choose builders based on their OFAC compliance status. It is uncertain whether this decision will be enshrined in the protocol, preventing builders or relayers from choosing their OFAC compliance status.

Brian Armstrong’s Potential Choice:
Brian Armstrong, CEO of Coinbase, may choose the regulated option if Coinbase faces regulatory pressure.

Censorship Resistance in the Post-Merge Era:
With the removal of Relayers as centralized trust providers, the market for builders is becoming more competitive. Winning builders have limited censorship abilities due to economic disincentives and validator preferences for non-censoring builders. This shift reduces the risk of censorship in the post-merge era.

Rollup-Centric Roadmap and L2 Progress:
Layer 2 solutions have thrived, with thriving ecosystems, improved interoperability, and compression advancements. ZK EVMs have exceeded expectations in terms of speed and efficiency. However, progress on fraud proofs has been slower than anticipated. The potential for fraud proofs to be as challenging as ZKVM development raises questions about the future of optimistic roll-ups.

Ethereum’s Focus for 2023-2024:
Scaling at all layers is a primary priority, including rollup-ready Ethereum protocol, user-friendly rollups, application integration, bridge infrastructure, and wallet support. Transitioning from rapid development to stability mode is crucial. The ecosystem needs to shift from firefighting mode to a focus on long-term sustainability and carefully planned roadmap implementation. Smaller items like the Verge, Purge, Splurge, account abstraction, and ZK snarking will also be addressed.

Post-Merge Era and Community Engagement:
The “when” focus of the Ethereum community is shifting away from the merge and token issuance. Developers can adopt a more relaxed and intentional approach to development. Perfectionism and careful planning can ensure high-quality implementations of 4844, PBS, and other protocol changes. Ethereum developers and the community should collaborate to ensure a sustainable and long-term roadmap for the ecosystem.

Conclusion of the Conversation:
The second half of the conversation about Ethereum as a platform for network states, its intersection with AI, and DAO governance will be released next Monday. Bankless Premium subscribers can listen to the full conversation immediately.

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