13 Jan 2025

Vitalik Buterin’s Master Plan for Ethereum’s Future

Vitalik Buterin’s Master Plan for Ethereum’s Future

In his latest blog post, Vitalik Buterin reflects on Ethereum’s shift to the PoS algorithm and outlines the challenges the blockchain of the second-largest cryptocurrency is currently facing. He also details the tasks that Ethereum developers must now tackle.

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Buterin managed to streamline Layer 2 (L2) solutions by offering clear criteria for aligning existing projects. However, making changes to Ethereum’s core protocol has proven to be a more difficult task.

In the article titled “Possible Futures of the Ethereum Protocol,” Buterin and his co-authors trace the project's history, explaining why altering its foundational structure is challenging, but ultimately achievable.

Stage 1: The Merge and Its Challenges  

In the past, Ethereum used a lot of energy to validate transactions because it operated on the Proof of Work (PoW) algorithm. Now, Ethereum has switched to a more energy-efficient method—Proof of Stake (PoS). This transition, known as “The Merge,” took place in September 2022.

Read more: The Merge Is Here! Market and Community Reactions

After the switch to the new algorithm, Ethereum set three main goals:

  1. Speeding up transaction finality times, which currently range from 15 seconds to 6 minutes.
  2. Making participation in the network more accessible. Currently, becoming a validator requires holding 32 ETH, which is a high barrier for many potential participants.
  3. Minimizing overhead costs.

Ethereum’s Trilemma. Source: vitalik.eth.limo

Ethereum’s Trilemma. Source: vitalik.eth.limo

The issue is nearly existential, as these goals conflict with each other. To make the network faster, you need more participants. To allow broader participation, you need to lower the amount of ETH required to be a validator, which could, in turn, weaken the security of the blockchain.

Vitalik Buterin calls this dilemma “economic finality.”

The core challenge for the Ethereum team now is to make it so costly to attack the network that it becomes impractical. Once that is achieved, they can lower the entry barrier for validators. This is what Buterin means by “economic finality.”

But how can they accomplish this? According to Vitalik, simply changing the voting mechanism won’t be enough to reach the desired outcome. 

A Simple Example

Imagine Ethereum randomly selects a group of validators to confirm each block (similar to what happens on the Algorand blockchain). While it sounds promising, there is a significant challenge: if a malicious actor controls more than 50% of the selected group of validators, they could easily reverse confirmed transactions. They wouldn’t need to bribe all the node owners, just enough to gain a majority. The rest of the group, even if unaware of the fraud, could be left uninvolved. 

This method would make it much easier for hackers.

Ethereum’s solution is to create a mechanism where reversing a block would require deceiving or bribing nearly all the validators. However, such a system would increase transaction confirmation times (which Ethereum aims to reduce) and require validators to use more powerful equipment.

Stage 2: Balancing Speed, Accessibility, and Security  

Ethereum now faces the difficult task of making the network faster and more accessible while maintaining its high level of security.

At this stage, developers are focused on two main goals:

  1. Speeding up Finalization: Vitalik Buterin's target is to reduce the time to finality from 12 seconds to 6 seconds, and ideally to 4, so that users can get transaction confirmations almost instantly.
  2. Lowering the Staking Entry Requirement: The goal is to allow validators to participate with as little as 1 ETH (instead of the current 32 ETH), making solo staking more accessible and encouraging more users to join.

This approach is called “single-slot finality,” where blocks are confirmed within a single time frame. It requires a large number of participants who are fully synchronized. 

The Tendermint protocol already uses a similar consensus mechanism, balancing high-speed finality with fault tolerance.

Single-Slot Finality Implementation. Source: vitalik.eth.limo

Single-Slot Finality Implementation. Source: vitalik.eth.limo

However, Ethereum has a unique feature that sets it apart from Tendermint—its resilience to long periods of validator inactivity. This feature, known as “inactivity leaks,” allows the network to continue operating even during prolonged validator downtimes. 

Read more: Byzantine Fault Tolerance: A Lesser-Known Blockchain Feature

Vitalik notes that Ethereum developers are working hard to solve these issues. They are testing various solutions and running experiments to find the best possible outcome.   

One of the most promising directions, according to him, is “two-tiered staking.”

What is Two-Tiered Staking and How Does It Work?  

Imagine there are two types of guards protecting a castle (the blockchain): experienced knights and younger squires. The knights take on the primary responsibility for security, while the squires assist them. This is a simplified analogy for two-tiered staking.

In the foreseeable future, Ethereum could introduce two types of participants in its system:

  1. Knights: These are validators with a significant amount of staked coins. They are directly involved in block validation and hold the primary responsibility for securing the network. These participants have been in place since the implementation of The Merge.
  2. Squires: Validators with smaller amounts of staked coins. Their role is to assist the knights by handling tasks such as pre-verifying transactions or generating participant lists.

By lowering the entry threshold for node operators, more people will be able to participate in the network. Dividing the responsibilities between these two types of participants should, in theory, increase the network's efficiency.

There are a few approaches to implementing two-tiered staking:

  1. Orbit SSF: This protocol helps manage validator teams for solo staking and aims to strike a balance between security and performance, making attacks on the network more costly.
  2. Brute-Force SSH: This approach leverages complex cryptographic algorithms to process large amounts of data, ensuring high network performance.
  3. Role Delegation in Validator Groups: In this model, squires and knights can delegate certain responsibilities to each other within random validator groups, enhancing the flexibility of the system. 

Single-Slot Finality Implementation. Source: vitalik.eth.limo

Single-Slot Finality Implementation. Source: vitalik.eth.limo

Choosing the right method involves answering three key questions:

  1. How important is it to make hacking the network prohibitively expensive?
  2. How will added complexity affect the network’s performance?
  3. Is having a large number of validators truly necessary for a project to be considered decentralized?

Developers are still discussing how to balance security, speed, and decentralization. It’s likely this conversation will continue, as the blockchain trilemma—balancing scalability, decentralization, and security—has been a persistent challenge that top cryptographers have been trying to solve for years.

Related: Modular Blockchains: A Solution to the Scalability Trilemma

The Issue of Hidden Block Proposer Selection in Ethereum  

Currently, the Ethereum blockchain has a predetermined system for selecting the validator who will propose the next block, thanks to a coded sequence within the protocol. This creates a vulnerability: an attacker can identify a node's IP address and target it to disrupt the proposed block.

To protect the network from such attacks, it’s crucial to conceal information about the activation order of validators until the moment they pass on their authority. One potential solution to achieve this is by utilizing Secure Sockets Layer (SSL) certificates.

How SSL Works

The SSL protocol is a standard technology that secures internet connections by encrypting the data transmitted between a website and a browser (or among multiple servers). 

It prevents hackers from viewing or stealing any transmitted information, including personal or financial data. Essentially, SSL uses cryptographic methods to obscure which validator will propose the block. Each validator receives an encrypted identifier, and only the node corresponding to that identifier can prove its participation in the process and propose the block.

At first glance, this seems like an optimal solution to the problem, but there is a caveat.

Implementing SSL would require adding new cryptographic mechanisms to Ethereum, complicating the already intricate architecture of the protocol and requiring additional processing power from validators. Consequently, this issue remains unresolved and is still under discussion.

Moreover, Buterin is also addressing more practical challenges.

Stage 3: Enhancing Resistance to 51% Attacks and Increasing Quorum Threshold  

The current recovery mechanisms in Ethereum after a 51% attack rely on the assumption that the decentralized community can coordinate effectively in a critical situation to initiate a recovery process and perform a soft fork. However, these expectations may prove to be unrealistic.

Read more: Decoding Genesis Block: Why Forks Lack It

Vitalik mathematically demonstrates that creating an automated recovery mechanism capable of addressing any type of 51% attack is impossible. Nonetheless, partial automation based on specific rules (such as the rejection of compromised blocks) could significantly improve the system's resilience.

Ongoing Threats from Hackers

Ongoing Threats from Hackers

He acknowledges that the most Ethereum can currently guarantee is that hackers won't achieve a quick and clean victory.

Related: Different Types of Attacks on Blockchain

Moreover, Vitalik points out that the existing block finalization mechanism in Ethereum, which requires the agreement of 67% of validators, is often criticized for being overly rigid. However, he believes this threshold is insufficient and proposes raising it to 80%. This adjustment would enhance network security and resistance to attacks.

By requiring malicious actors to control a significantly larger share of the network, this increase would make attacks economically unfeasible and technically complex. Furthermore, in the event of disputes (such as the emergence of competing chains), raising the quorum threshold would help prevent hasty and unjustified soft forks, thus improving the network's stability.

Importantly, this measure would also serve as an additional incentive for participation in solo staking, promoting true decentralization within the network.

Final Words  

The blog post indicates that Buterin does not currently have any definitive solutions to offer. The initiatives he discusses are somewhat ambiguous, leading him to encourage open dialogue about the project's future and inviting anyone interested to join the conversation.

On a positive note, it is important to highlight that Vitalik acknowledges the need to lower the entry barrier for validators and recognizes the significance of solo stakers within the Ethereum network, even if they are viewed as “squires.”

Read more: Ethereum's Lesser-Known Facts

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