Last week’s Shapella upgrade was a pretty big event for Ethereum, but the network scaling process has only just begun.
Today, we take a look at where Ethereum will go after the Shapella event.
It may be a bear market, but that doesn’t stop the Ethereum developer community from shipping.
What will happen to Ethereum in the rest of 2023? Join the EIP-4844 Cancun hard fork and work on Distributed Validator Technology (DVT) and Proposer-Builder Split (PBS). Let’s dig deeper together.
1. Hard fork EIP-4844 Cancun
EIP-4844 Is the next big hard fork – designed to solve Ethereum’s scalability problems. We’ve probably heard this comparison a million times: Visa handles thousands of transactions per second, while Ethereum can only handle double-digit transaction volumes per second. The network needs to solve the core problem of usability: scalability.
Nowadays, the scalability problem can be solved by chained aggregation like Arbitrum, Optimism. The basic idea of how rollups help Ethereum scale is that they push the computational burden of transaction processing to the second layer. Once complete, they republish the transaction data to the underlying Beacon Chain Layer 1 for consensus and storage.
Unfortunately, rollups are only a temporary solution and are too expensive and too slow. This is not rollup’s fault – it depends a lot on the design architecture of the underlying layer 1 chain. The fastest rollups still require sending large amounts of data to reach consensus on layer 1 chains that already lack available storage space. Furthermore, it places a heavy burden on nodes to download this data – an estimated 95% of aggregated transaction fees are spent on publishing data costs alone.
The above limitations bring us to EIP-4844. EIP-4844, named after ethereum researcher Dankrad Feist, is a “proto-danksharding” proposal that aims to increase the speed and cost of using tumbling wheels. In the words of Dankrad, it is a tool to support and accelerate rollups. Proto-danksharding is an early pioneer in completing darksharding, which is still a few years away on the Ethereum roadmap, hence the “proto” prefix. But even this initial proposal promises to bring big changes to ethereum.
EIP-4844 splits the blockchain network into different databases, which adds room for millions of additional transactions on Ethereum (a whole new usable data layer). This separation is called “sharding”. In simple terms, sharding is like adding lanes to a congested highway (which is now the Ethereum network). That’s why EIP-4844 was included in ethereum’s so-called “Surge” roadmap phase.
Updated roadmap! pic.twitter.com/MT9BKgYcJH
— vitalik.eth (@VitalikButerin) November 4, 2022
When the proto-danksharding process is complete, Ethereum blocks can store 1-2 megabytes of data (compared to the current 50-100 KB capacity), which greatly reduces the cost of using rollups by about 20 times (finally completed danksharding will allow blocks to carry 16-32 megabytes).
As the space for danksharding expands, there will be more room for “blob-carrying transactions”, a new type of transaction that remains in beacon chain nodes for a limited time (perhaps as long as possible, weeks or months). During this time, node validators will use a clever technique called “data availability sampling” to randomly sample a portion of the data blob for validation without actually downloading all the data.
Why is EIP-4844 so important? Ethereum rollups (as they are currently live) cannot be used for use cases such as gaming or social media that require higher transaction loads.But the builders couldn’t wait, so they tried to scale by embracing decentralization, as we’ve seen in most cases Cryptocurrency Related Games and Side Chain Bridge Design. EIP-4844 is the unlocking solution for fully on-chain use cases, potentially enabling a wave of innovation for builders.
When will proto-danksharding be completed? Currently, all we know is that EIP-4844 is scheduled to launch sometime between Q3-Q4 2023. But like most other major ethereum network upgrades, the actual launch date may be delayed.
2. Distributed verification node technology
Another major technological innovation worth noting in Ethereum in the near term is the development of Distributed Validator Technology (DVT), an area of research that the Ethereum Foundation has been exploring since 2019.
Today, running an Ethereum node is a technically heavy solitary job requiring operators to commit 32 ETH alone. Node operators could lighten the burden and choose to stake through Coinbase or Lido, but each of these alternatives has important decentralization tradeoffs.
DVT attempts to simplify node verification without sacrificing decentralization by enabling an independent type of “team staking”. A group of friends can collectively stake different amounts of ETH and run a node instead of just 32 ETH staked. This is done through multi-party computation (MPC), which allows a group of people to share private keys like a multi-signature and run “distributed validators” together.
DVT independently amortizes the cost of staking by lowering the financial barrier for individuals or small DAOs to participate as Ethereum validators. This helps a lot in reducing market concentration of ETH staking accumulated on Lido and centralized exchanges.
Source: Dune Analysis
DVT also makes node verification a more robust overall process. In the event of a hardware failure, distributed validators running on the same node are interchangeable. As with multisig, private keys shared via DVT will help prevent exploits by attackers.
DVT is not yet available to the public, but companies like Obol are already using it deployment test Mainnet, likely to be ready in Q3 2023.
3. Separation of supporters – builder
The word “distributed” is used a lot in the crypto space, but that’s notoriously not the case for most blockchains.
The main focus of the Ethereum protocol layer is the way blocks are constructed. When we complete transactions on the wallet, they are put into a pool of pending transactions in the mempool. Block validators (miners in PoW, stakers in PoS) have a bird’s-eye view of this mempool, spot a profitable opportunity, and start selling priority rights to build blocks in the underground bribery market. Give a bot a chance (seeker).
These types of value extraction techniques are known as Maximum Extracted Value (MEV) attacks. They are largely hidden from everyday users, but remain an existential threat to the decentralized nature of Ethereum, with block miners already extracting approx. $676 million before the merge event.
The proposer-builder separation (PBS) is the Ethereum development community’s answer to this question. As the name suggests, PBS aims to establish a clear division of labor between two important tasks of the block building process: proposing blocks and building blocks. In doing so, block validators are deprived of the ability to distinguish individual transactions, since the content of a block is not determined by the same entity that ultimately built the block on-chain.
PBS won’t be ready to hit the market until 2023, and it may take more than two years to wait. Before this, third-party solutions like Flashbots’ MEV-Boost have emerged to help solve this problem by creating an open free market in the block building process. .
Currently, Ethereum has completely shifted to PoS. Once Merge and Shapella are complete, the Ethereum community can move on to address other issues: lack of scalability, capital inefficiency, and centralization of block validators.
EIP-4844, distributed validator technology, and proposer-proposer splits are just some of the standout solutions that have drawn attention.
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According to Bankless