Vitalik: Ethereum needs to go through three technical transitions – L2, wallet security, and privacy.

Vitalik: Ethereum must undergo three technical transitions: L2, wallet security, and privacy.

Vitalik Buterin has released a new article, stating that Ethereum needs to undergo three technological transitions: L2 scaling transition, wallet security transition, and privacy transition, to reshape the relationship between users and addresses. He analyzes the impact and challenges brought by these three transitions on on-chain payments and key recovery, proposes possible solutions, and believes that many auxiliary infrastructure needs to be updated, wallets need to protect assets and data, and we need to return to the challenge of “identity”.

As Ethereum transitions from a young experimental technology to a mature technology stack that can bring open, global, and permissionless experiences to ordinary users, the stack needs to undergo three major technical transitions that roughly occur simultaneously: 1) L2 scaling transition – everyone moves to rollups; 2) Wallet security transition – everyone moves to smart contract wallets; 3) Privacy transition – ensuring privacy-protecting fund transfers are available and ensuring all other developing tooling (social recovery, identity, reputation) is privacy-protecting.

In the L2 scaling world, users will exist on many L2s, and the days of having only one address per user are gone. Smart contract wallets introduce complexity that makes having the same address across L1 and various L2s more difficult. Privacy demands that each user has more addresses, and may even change the types of addresses we are dealing with. Each of these three transitions weakens the “one user = one address” mental model in different ways.

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Fortunately, the transition to smart contract wallets is not a big burden on the addressing system, but there are still some technical issues that need to be addressed in other parts of the application stack. Wallets need to be updated to ensure they do not only send 21,000 gas in transactions, and more importantly, to ensure that the payment recipient of the wallet tracks not only ETH transfers from EOA, but also ETH sent by smart contract code. The stealth address protocol relies on the concept of meta addresses, and in a privacy-friendly ecosystem, users will have both spending and encryption public keys, and their “payment information” must include both keys. In addition to payments, there are other compelling reasons to expand in this direction.

The default method for implementing key changes and social recovery in a world of single-user multiple addresses is to have the user run the recovery process separately on each address. However, even with UX simplification, naive multi-address recovery has three problems: 1) expensive gas; 2) counterfactual addresses, i.e. addresses that have never received funds; 3) privacy. There is an elegant and performant solution: an architecture that separates verification logic from asset holding. Each user has a keystore contract, which exists at some location (mainnet or L2). The user then has addresses on different L2s, with the verification logic for each address pointing to the keystore contract. Spending from these addresses requires proof of entry into the keystore contract, showing the current (or more realistically, recent) spending public key.

Reference: https://vitalik.eth.limo/general/2023/06/09/three_transitions.html

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