Vitalik Buterin Speech Transcript The Past and Present of Ethereum

Compiled by: fanfan

Produced by: DeThings

Editor’s note: This article is a keynote speech delivered by Vitalik Buterin, co-founder of Ethereum, at Nanyang Technological University in Singapore on September 6th. Unlike his speech on “Challenges and Solutions Faced by Ethereum” at KBW (Korea Blockchain Week) on September 5th, Vitalik’s speech this time is more macroscopic, focusing on the “Past and Present of Ethereum”. He starts from the birth of Ethereum, talks about the realization of “smart contracts” and the transformation of Ethereum’s “consensus mechanism”. These milestones, destined to be recorded in the history of blockchain, are vividly described by him. Known as “V God” in the Chinese blockchain world, he seems to always dress in T-shirts, shorts, and sneakers. The newborn crypto world has gone through multiple cycles, with countless people rising and falling, but this trailblazer has never stopped.

The following is the full text of the speech:

The Birth of Ethereum

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

In 2014, we released the Ethereum white paper, which basically described our initial vision for Ethereum. However, the white paper did not provide detailed explanations of some of the underlying ideas behind the theory. 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 white paper, I mentioned some ideas proposed by others and one of the ideas I started thinking about, which was to issue one’s own assets on top of Bitcoin. Today, on Ethereum, we have ERC-20 tokens, but back then we had Colored Coins, which was 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 an application. You can use it to represent ownership of physical goods, which was called “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.

The Journey from the “Dream of Smart Contracts” to Reality

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 so on. All these different things can be defined through 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 within the organization. You can vote directly at very low cost.

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

These are all tools that can be used and involve smart contracts and DAOs. There are various types of DAOs being used with different logics worldwide. Although they haven’t been widely adopted outside the ecosystem so far, they do exist, and some have been operational for years. These are some of the applications we see today. Obviously, there are other emerging applications that surprise me. For example, NFTs (non-fungible tokens) are an example. But many of the other things that exist today are essentially 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 called “merging,” before that, Ethereum’s energy consumption was almost equivalent to 40% of Singapore’s, and now it has been reduced to almost zero. So, the state transition is finally complete, but it is the result of nearly 10 years of work in the ecosystem. The first five years of proof of stake were basically research, where we tried to understand the essence of proof of stake and various options for different state spaces, eventually converging to a practically effective specific version.

The Transformation of “Consensus Mechanism”

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

In fact, in 2018, I published a series of tweets reviewing the progress of Ethereum’s state research and how we transitioned from initial exploration to state chains and ultimately settled on a specific algorithm.

First, there was 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 may range from 10 to 50. Now, this level of scalability is very limited, and to support mainstream finance, mainstream payments, and global systems, we need to process approximately 100,000 transactions per second. If we can only process 20 transactions per second, it would take the population of one million people in the world 4 million seconds, or approximately 13 years, to execute a transaction on Ethereum. Therefore, improving scalability is very important.

Back in the early days, 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, so their scalability is limited.

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 works, where BitTorrent works by dividing data into small pieces and allowing people to share, 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 to achieve consensus 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, which is 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 complexity. Basically, we had to work hard to make things very simple because we know that it takes 2 years to develop if it takes 2 months or 2 weeks to write a specification. If it takes 6 weeks to write a specification, it may take 6 years to develop. We had to work very hard to reduce complexity and make sacrifices, and ultimately we approached 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 was talked about 6 years ago. This is a slide from an Ethereum conference, I think at that time, where I described some of the major issues of Ethereum, such as privacy, consensus, smart contract security, and scalability. If you ask me or others what the biggest challenges Ethereum faces, you would 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, and there was a new type of cryptography called zero-knowledge proofs, or zk-SNARKs. This allows you to create cryptographic proofs that prove certain mathematical properties, like the data you own, without revealing any other information about that data. This was first used by, a privacy-focused cryptocurrency launched in 2016, which used zk-SNARKs to achieve privacy. How does it work? Basically, when you spend a coin in, 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 statement that needs to be proven in order to have a currency system that doesn’t inflate excessively, but all other information remains private.

Going back to 2017, the challenge was simply to introduce this technology to Ethereum and make zk-SNARKs work. These technologies are based on a complex mathematical theory called elliptic curve cryptography. In terms of using 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 technology has advanced significantly with very advanced zk-SNARKs libraries, development environments, tools, and protocols. We have a long list that includes very interesting technologies like StarK, ZK Rollup, Cairo, and more. In fact, privacy could become another bottleneck, mainly due to legal issues and the question of whether the tokens generated by these systems will be 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, with the goal of proving that your tokens were transferred through a 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 came from. In fact, there will be a paper published soon about this idea. Several companies have already proposed different solutions. So, there is a lot of work to be done in the details to increase the confidence of exchanges in accepting tokens from users who use privacy systems when depositing tokens.

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 make the cost of verifying proofs lower. 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, whereas by 2023, these building blocks are already working, but our focus is on optimizing them and doing some more complex work to better integrate them 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 had just started development. By 2023, Ethereum has fully transitioned to a consensus mechanism and has become a complete consensus mechanism. But the challenges still include reducing the complexity of the protocol, improving the security of the protocol, addressing centralization issues, making it easier for people to participate, and making it easier for a concept called PDS to participate without needing to run complex algorithms to optimize returns.

In terms of smart contract security, addressing smart contract security issues may be the slowest progress among these four issues, because in 2017, it was only a year since the DAO hack incident, where DAO was a smart contract that controlled an investment fund of about $150 million. 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 DAO.

At that time, it was the only similar event that occurred in 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 safer. By 2023, a lot of progress had been made in this area. I believe that the frequency of hacker attacks has been greatly reduced. 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 safe. 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 several months releasing updates almost every day. I know that hackers are finding new vulnerabilities every day, so we constantly fight against and discover minor issues. After four years of effort, these security issues were finally fixed through a series of different changes and improvements. EIP 2929 has also brought many improvements to the Defi codebase. The Gas optimizer has also done some amazing work. In short, many security issues have actually been quietly resolved.

When you switch from Proof of Work to Proof of Stake, a major event called “the merge” occurs. In terms of security, there were no major events because the focus was on having no events. But sometimes it is important to remember that no events happened, and that is good news. Therefore, I believe that substantial progress has 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 state channels and adders, which were large-scale legal solutions. Then around 2020, everyone turned to Rollups. Today, there are various types of Rollups, including ZK-Rollup, Optimistic Rollup, and so on. These Rollups started to break 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 system, making the proof system faster, so that it takes only 5 hours for a block to be proven with CKDM, which could be reduced to 2 minutes in the future, and possibly eventually reduced to 12 seconds.

Although we have made a lot of progress, problems still exist, but significant progress has been made on each problem. There is also a lot of work in other aspects, such as 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 teams and thousands of lines of code, thinking deeply about how to apply it to Ethereum. It may take only 1 to 2 years to truly achieve it. There are also improvements to the EVM, maximizing and simplifying it. Account abstraction is a very important direction, and everyone who supports account abstraction has their own reasons. I support account abstraction because it is inherently very flexible. 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 have multi-factor authentication. You can store the keys in trusted hardware modules that exist on modern smartphones, or you can use hardware wallets, or even combine multiple hardware wallets. You can use very complex methods such as email accounts for authentication, or you can 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 cryptocurrencies. 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 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 has made cryptocurrencies more accessible to those without a banking system, and without DeFi, they would have no other options, I think it’s good to provide these alternatives.

But at the same time, I think 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 with this. They have been becoming more and more decentralized. We are working to solve this problem, but the problem is that a decentralized approach like this doesn’t actually exist for people like the coffee shop owner. Although it is technically possible to achieve more decentralization, a decentralized approach doesn’t actually exist for these holders. Therefore, 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. Can we turn these concepts into truly beneficial applications that benefit people?

These technological efforts have been following a fairly 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. But the rules are the same. But now I think there is a greater need to focus on actual adoption and usage. Solutions involve technical work, but decentralization is stronger and distributed across different layers. This means that the Ethereum Foundation, the Ethereum core development team, and the 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 that people have been trying to do for many 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 decentralized benefits for 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 addressing 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 solve most of these challenges.

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