Vitalik’s Full Text on the Evolution of Ethereum in Singapore Ten Years of Ethereum and Current Challenges

Vitalik's Full Text on Ethereum's Evolution in Singapore 10 Years & Current Challenges

Author | Vitalik Buterin

Translation | DeThings

Original Article Link

https://www.dethings.com/app/h5/#/pages/common/topicDetail/topicDetail?id=8437

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This article is a keynote speech delivered by Vitalik Buterin, the co-founder of Ethereum, at Nanyang Technological University in Singapore on September 6th. It is different from his speech at KBW (Korea Blockchain Week) on September 5th, which focused on the “challenges and solutions facing Ethereum.” In this speech, Vitalik takes a macro perspective and discusses the “past and present of Ethereum.” He starts by talking about the birth of Ethereum, from the vision of “smart contracts” to their implementation, and the evolution of Ethereum’s consensus mechanism. (There is a typo in the title, “evolution” should be “keynote speech”)

Below is the full text of the speech:

The Birth of Ethereum

Today, I plan to review the history of Ethereum, starting from its beginnings in 2013 and 2014, and the changes the project has undergone since then, as well as how our thinking about certain issues has changed compared to 5 or 10 years ago.

In 2014, we released the Ethereum whitepaper, which basically described our initial vision for Ethereum. However, the whitepaper did not provide detailed explanations of the underlying ideas behind some of the theories. Ethereum is a decentralized system, similar to Bitcoin. It is a blockchain, but unlike previous systems that attempted to support only one application, Ethereum allows users to build their own applications. This means that users can write their own application code, upload it to the blockchain, and then the application can run on the blockchain.

At the beginning of the whitepaper, I mentioned some ideas proposed by others, as well as one of the ideas I started thinking about, which is issuing one’s own assets on top of Bitcoin. Today, on Ethereum, we have ERC-20 tokens, but back then we had Colored Coins, which were an early attempt to issue one’s own assets on top of Bitcoin. Interestingly, a specific version of Colored Coins has recently been introduced into the Bitcoin protocol, so Colored Coins seems to be gaining attention again, but Colored Coins is just one application. You can use it to represent ownership of physical objects, which was referred to as “smart property” at the time. You can also own other types of assets, such as domain names. You can establish a system on the blockchain for registering websites, registering usernames, tracking user and application reviews, and so on.

From the Vision of “Smart Contracts” to Their Implementation

All of these can be achieved in a distributed manner on the blockchain. The concept of smart contracts is that you can have computer programs on the blockchain that can directly control digital assets. An asset doesn’t have to be owned by an individual; it can be owned by a program. This concept of smart contracts can be used to implement many more complex applications. For example, you can have prediction markets, financial instruments, stablecoins, leverage, and more. All these different things can be defined using smart contracts. In addition, there is the concept of DAO, which basically uses smart contracts to implement the voting or governance logic of an entire organization on the blockchain, without relying on the legal system to resolve internal disputes. You can vote directly at a very low cost.

Therefore, many concepts in these application areas have been in existence and are still evolving. We used to have Colored Coins, and now we have ERC-20 tokens. We used to have smart property, although there hasn’t been much progress, but we have the Ethereum Name Service (ENS), which many people are using. For example, my blog has been uploaded and may be accessible through ENS. If you use an Ethereum-supported browser like Brave, you can simply enter eth.link to access the front-end page of my blog.

These are all tools that can be used, involving smart contracts and DAOs. There are various types of DAOs being used with different logics around the world. Although they haven’t been widely adopted outside the ecosystem so far, they do exist, and some have been in operation for years. These are some of the applications we see today. Obviously, there are other emerging applications, some of which surprise me. For example, NFTs (Non-Fungible Tokens) are an example. But many other things that exist today are basically very similar to our ideas 10 years ago. The research on consensus mechanisms is also the same. Today, Ethereum has ultimately become a consensus mechanism chain. The consensus mechanism greatly improves security and reduces Ethereum’s energy consumption by over 99.9%. Previously known as “merging,” before that, Ethereum’s energy consumption was equivalent to about 40% of Singapore’s, but now it has been reduced to almost zero. Therefore, the state transition has finally been completed, but it is the result of our work in the ecosystem for nearly 10 years. The first five years of Proof of Stake were basically research, as we tried to understand the nature of Proof of Stake and various options in different state spaces, eventually converging to practical and effective specific versions.

“Transition of Consensus Mechanism”

In a blog post in 2015, we described a mechanism called the “consensus mechanism,” attempting to encourage validators to send a series of messages expressing confidence in specific block heights to achieve consensus more effectively. Later, we found that our consensus mechanism had many problems. It was too complex and not as simple and effective as the Casper protocol that later evolved. But it was a step we took in a deeper understanding of this field.

In fact, in 2018, I published a series of tweets reviewing the progress of Ethereum’s state research and how we gradually transitioned from initial exploration to a state chain and eventually determined the exact algorithm.

First came the research, and then the next four years focused on scalability. Scalability is crucial for Ethereum because, as of today, Ethereum can only process 10 to 20 transactions per second. In fact, this depends on the complexity and size of the transactions and can range from 10 to 50. Now, this level of scalability is very limited. To support mainstream finance, mainstream payments, and global systems, we need to process about 100,000 transactions per second. If we can only process 20 transactions per second, then a population of one million people would need to spend 4 million seconds, or about 13 years, to execute a transaction on Ethereum. Therefore, improving scalability is very important.

Early on, attempts to improve scalability were referred to as “sharding,” and what we are doing now is still a form of sharding, but since then, many different things have been designed and modified into this mechanism. The basic idea is that traditional blockchains, like Bitcoin, require every computer in the network to process every transaction, thus limiting its scalability.

We changed this design. Instead of every node processing every transaction, each node only processes a small portion of the transactions. This works similar to how BitTorrent operates, where BitTorrent works by dividing data into small pieces and allowing people to share them, even though there is a lot of popular data, not everyone needs to store the entire file. Because for people, that would be too much data. So the challenge is how to have some form of history while still having a consensus system that allows people to agree on the order of things arriving, so that financial systems can be built on top of it. This is a technical challenge. This is one of our early concepts, namely sharding, where you basically divide transactions into different groups, each with its own nodes that independently process transactions. This is a very complex idea. Since then, we have had to work very hard to reduce the complexity. Basically, we have to make things very simple because we know that it takes 2 months or 2 weeks to write a specification, it takes 2 years to develop. If it takes 6 weeks to write a specification, it may take 6 years to develop. We have to work very hard to reduce complexity and make a lot of sacrifices, and in the end, we have come close to the structure we have today.

Technological Progress and Challenges of Ethereum

Interestingly, one point about the technological progress of Ethereum is that what we are talking about today is very similar to what we were talking about 6 years ago. This is a slide from an Ethereum conference, I think at that time, where I described some of the main issues of Ethereum, such as privacy, consensus, smart contract security, and scalability. If you ask me or others what the biggest problems Ethereum faces, you will get basically the same answer: privacy, consensus, smart contract security, and scalability.

These challenges are the same today as they were 6 years ago, but at the same time, I think it’s interesting to see some progress made since 2017. For example, in 2017, privacy was just a technical challenge, there was basically a new type of cryptography called zero-knowledge proofs, or z k-SNARKs. This allows you to create cryptographic proofs that prove certain mathematical properties, such as the data you possess, without revealing any other information about that data. This was first used by Z.cash, a privacy-focused cryptocurrency launched in 2016, which uses zk-SNARKs to achieve privacy. How does it work? Basically, when you spend a coin in Z.cash, instead of directly pointing to the coin you are spending, you need a proof that proves you are spending an unspent coin without revealing any other information about that coin. You prove the statements that need to be proven in order to have a non-inflationary currency system, but all other information remains private.

In 2017, the challenge was simply to introduce this technology into Ethereum and make zk-SNARKs work. These technologies are based on a complex mathematical theory called elliptic curve cryptography. Regarding the use of this technology, we basically added a layer called “zero-knowledge statements” which is a code that allows you to use zk-SNARKs on the blockchain. Therefore, using smart contracts, you can actually build an application on Ethereum with the same privacy protection logic. This was the situation in 2017. By 2023, the technological state is very advanced, with highly advanced zk-SNARKs libraries, development environments, tools, and protocols. We have a long list, including very interesting technologies like StarK, ZK Rollup, Cairo, and so on. In fact, privacy may become another bottleneck, mainly due to legal issues and the question of whether the tokens generated by these systems are accepted by the wider financial system. For example, Tornado Cash has legal issues and can be seen as privacy tokens on Ethereum because hackers have used it.

Therefore, a concept called “proof of innocence” has emerged, aiming to prove that your tokens are sent through the privacy system, but not from one of the hackers. You prove that you are not one of the hackers without fully disclosing where the tokens come from. In fact, a paper on this idea will be published soon. Several companies have already proposed different solutions. Therefore, there is a lot of work to be done in the details to increase the level of acceptance of tokens by exchanges when users who use a privacy system deposit their tokens into the exchanges without causing great suspicion.

In addition, there is work on the verification and validation aspects of zk-SNARKs to reduce the cost of verifying proofs. The goal is to lower the cost of verifying proofs. Part of the reason is zk-Rollup, and part of it is aggregation protocols. The difference between 2017 and 2023 is that in 2017, we were just trying to make the basic building blocks work properly, and by 2023, these building blocks are already working properly, but our focus is on optimizing these building blocks and doing some more complex work to integrate them better with the mainstream world. In terms of consensus security, in 2017, we basically only completed the research part of the consensus mechanism development process and just started development. By 2023, Ethereum has completely transitioned to a consensus mechanism and has become a fully-fledged consensus mechanism. However, the challenges still include reducing the complexity of the protocol, improving the security of the protocol, solving centralization issues, making it easier for people to participate, and making it easier for a concept called PDS to participate without the need to run complex algorithms to optimize returns.

In terms of smart contract security, solving smart contract security issues may be the slowest progress among these four issues because in 2017, it had only been a year since the DAO hack incident. At that time, DAO was a smart contract that controlled around $150 million of investment funds. It was then attacked by hackers. In fact, the hackers tried to escape, but eventually, the Ethereum community collaborated to return the money to the original owners of the DAO.

At that time, it was the only similar event that happened to Ethereum, so in 2017, this event was still fresh in everyone’s memory. People were very concerned about this security issue, so everyone was working hard to improve the security of programming languages to make projects more secure. By 2023, a lot of work in this area has been successful. I believe that the frequency of hacker attacks has greatly decreased. When attacks occur, it is usually because people are trying to build more complex projects, which have increased in complexity by 20 times compared to 2016. If the project you are building now is not 20 times more complex than in 2016, it is generally considered to be quite secure. There are many systems that have not been attacked for many years, which is a very impressive achievement. There have also been other improvements in security.

In the months following the DAO incident, there was an event called the “Shanghai DOS Attack”, where attackers exploited many vulnerabilities in the Ethereum protocol to slow down the entire blockchain by sending transactions. We spent months releasing updates almost every day. I know that hackers are finding new vulnerabilities every day, so we constantly fight against them and discover minor issues. After 4 years of effort, these security issues were eventually fixed through a series of different changes and improvements. EIP 2929 also brought many improvements to the Defi codebase. Gas optimizers have also done some amazing work. In conclusion, many security issues have actually been quietly resolved.

When you switch from Proof of Work to Proof of Stake, there was a major event called “the Merge”. In terms of security, there were no major events because the focus was on no events happening. But sometimes it is important to remember that the absence of events is good news. So I believe that substantial improvements have indeed been made in this regard, but there are still many ongoing issues.

So going back to 2017, sharding was just an idea. At that time, we were also discussing a lot about state channels and adders, which were large-scale legal solutions. Then around 2020, everyone turned to Rollup. Today, there are various types of Rollups, including ZK-Rollup, Optimistic Rollup, and so on. These Rollups began to move away from the training wheels and became truly decentralized, taking an important step in this direction. This year, Polygon has also taken a big step. This year, we are continuing to work on decentralizing these systems, enhancing the security of the proof systems, and making the proof systems faster so that it takes only 5 hours to prove one block using CKDM proof, which may be reduced to 2 minutes in the future, or even ultimately reduced to 12 seconds.

Although we have made a lot of progress, problems still exist, but significant progress has been made on each issue. There is also a lot of work in other aspects, such as state trees (Verkle trees). 5 or 6 years ago, stateless clients were just an idea. But now, state trees have become a project with hundreds of people in a team, writing thousands of lines of code, and deeply considering how to apply it to Ethereum. It may only take 1 to 2 years for it to truly be realized. There are also improvements to the EVM, maximizing and simplifying the EVM. Account abstraction is a very important direction, and everyone supporting account abstraction has their own reasons. I support account abstraction because it is inherently a very flexible thing. The goal of account abstraction is to say that instead of having accounts controlled by keys, it is better to have accounts controlled by computer programs. If you have accounts controlled by computer programs, users can define different logic for approving these transactions. You can have not only one key, but also three different keys, some of which are controlled by others. You can perform multi-factor authentication. You can store the keys in trusted hardware modules that exist on modern smartphones, or use hardware wallets, or even combine multiple hardware wallets together. You can use very complex methods like email accounts for authentication, or even use email accounts as a way to authenticate Ethereum addresses.

Back to Reality and Practical Applications

Back to the realm of reality and practical applications, one event that I often mention is an experience I had around 2021 when I traveled to Argentina. I was impressed by how many people were using Ethereum there, they were really using cryptocurrency. I remember on Christmas Day, most places were closed, so I just wanted to find a coffee shop. The first coffee shop I found, the owner recognized me and told me he had encrypted a wallet, so I asked him if I could pay with Ethereum, and he said yes, so we paid with Ethereum. But there was a problem, he wasn’t using the Ethereum mainnet, he was using Polygon. I appreciate the work that DeFi has done because it makes cryptocurrency more accessible to those without a banking system, and without DeFi, they wouldn’t have any other options, I think it’s good to provide these alternative solutions.

But at the same time, I believe as an ecosystem, the goal is to gradually reduce more and more single points of failure in the future. I think even the Ethereum Foundation agrees on this. They have been becoming more and more decentralized. We are working hard to solve this problem, but the problem is that a decentralized approach like this doesn’t actually exist for people like that coffee shop owner. Although it is technically possible to achieve more decentralization, a decentralized approach doesn’t actually exist for these holders. So, it is a very big challenge for these people on the chain to truly improve and make things better.

So basically, I don’t know if we can make these holders actually use the chain, benefit from it, enjoy the advantages of decentralization and global permissionlessness, and whether we can achieve a world where people can truly benefit from all the application areas that have been contemplated since 2013. Whether we can turn these concepts into truly beneficial applications and make people benefit.

These technological efforts have been following a rather consistent direction, which I find interesting. The tools have changed, and 10 years ago we didn’t even consider these issues, but now we are considering them. But the rules are the same. But now I think there is a greater need to focus on actual adoption and usage. The solutions involve technical work, but decentralization is stronger and distributed across different layers. This means that the Ethereum Foundation, Ethereum core development teams, and client teams are no longer the only places where extremely important work is being done, wallet companies are also places where extremely important work is being done, application developers are also places where extremely important work is being done, and even building enterprise blockchains. This is something people have been trying to do for years. But I think if you see it as a layer 3 on top of Ethereum, it is actually possible to make it feasible and truly provide the benefits of decentralization to those who want to use it and make it truly viable.

These are some of the biggest changes we have seen in the past 10 years. From an initial concept to a gradual process of solving various challenges in practical use, it has been a long and slow journey. I hope that in the next 5 years, we will be able to address most of these challenges.

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