Vitalik Buterin’s Master Plan for Ethereum’s Future

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.

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.

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.

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. 

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.

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

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.

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.”

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. 

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

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.

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.

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.

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.

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