Speech: Vitalik Buterin Translation: fanfan, DeThings
Editor’s note: This article is a keynote speech by Vitalik Buterin, co-founder of Ethereum, delivered at Nanyang Technological University in Singapore on September 6th. Unlike his speech at KBW (Korea Blockchain Week) on September 5th, which focused on the “challenges and solutions facing Ethereum,” Vitalik’s speech this time is more macroscopic, titled “The Past and Present of Ethereum.” He starts from the birth of Ethereum, talks about the vision and implementation of “smart contracts,” and the transformation of Ethereum’s “consensus mechanism.” These milestones, which are destined to be recorded in the history of blockchain, are vividly described by him. He, known as “V God” in the Chinese blockchain world, always appears in a T-shirt, shorts, and sneakers. The newborn crypto world has gone through several cycles, with countless people rising and falling, but this trailblazer has never stopped.
The following is the full text of the speech:
- Why didn’t Solana take off with the liquidity staked by over 70% of SOL?
- What does the Story Protocol, backed by a16z and funded with $54 million, aim to do?
- SharkTeam Analysis of the Black Industrial Chain of Rugpull Factory
The Birth of Ethereum
Today, I intend to review the history of Ethereum, starting from the beginning in 2013 and 2014, and the changes the project has undergone since then. I also want to discuss how our thinking about certain issues has evolved over the past 5 or 10 years.
In 2014, we published the Ethereum white paper, which basically described our initial vision for Ethereum. However, the white paper did not provide detailed explanations of the underlying theories behind some of these ideas. 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 run the application on the blockchain.
At the beginning of the white paper, I mentioned some ideas proposed by others, as well as one of the ideas I started thinking about, which was issuing your own assets on top of Bitcoin. Now, on Ethereum, we have ERC-20 tokens, but back then we had Colored Coins, which were an early attempt to issue your 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 receiving attention again. However, Colored Coins was just one application. You could use it to represent ownership of physical items, which was called “smart property” at the time. You could also own other types of assets, such as domain names. You could establish a system on the blockchain for registering websites, registering usernames, tracking user and application comments, and so on.
The Vision and Implementation of “Smart Contracts”
All of these things could 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 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 could have prediction markets, financial instruments, stablecoins, leverage, and so on. All of these different things can be defined using smart contracts. Additionally, 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. It doesn’t rely on the legal system to resolve internal disputes within the organization, and you can vote directly at a very low cost.
Therefore, many of these application concepts have been around and continue to evolve. We used to have Colored Coins, and now we have ERC-20 tokens. We used to have smart properties, although not much progress has been made, 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, 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 globally. Although they have not been widely adopted outside the ecosystem so far, they do exist, and some have been in operation for many years. These are some of the applications we currently see. 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. Consensus mechanisms greatly improve security and reduce Ethereum’s energy consumption by over 99.9%. Previously referred to as “merging,” before that, Ethereum’s energy consumption was equivalent to about 40% of Singapore’s, and now it has been reduced to almost zero. Therefore, the state transition is finally completed, but this 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 nature of proof of stake and various options for different state spaces, and eventually converged to a practical and effective specific version.
The Transformation of “Consensus Mechanisms”
In a blog post in 2015, we described a mechanism called “consensus mechanisms,” attempting to encourage validators to send a series of messages expressing confidence in a specific block height to achieve consensus more efficiently. Later, we found that our consensus mechanism had many problems. It was too complex and not as simple and effective as the later evolved Casper protocol. But it was a step we took in 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 transitioned from initial exploration to state chains, and finally determined the exact algorithm.
First, there was research, and then the next four years focused on scalability. Scalability is crucial for Ethereum because currently, Ethereum can only process 10 to 20 transactions per second. In fact, this depends on the complexity and size of the transactions, which may 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 approximately 100,000 transactions per second. If we can only process 20 transactions per second, then it would take the global population of one million people about 4 million seconds, or approximately 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, such as 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 works, where BitTorrent works by dividing data into small chunks and allowing people to share, even though there is a lot of popular data, not everyone needs to store the entire file. Because that would be too much data for people. 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, in order to build financial systems on top of it, etc. This is a technical challenge. This is one of our early concepts, sharding, where you basically divide transactions into different groups, each group having 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 very hard to make things very simple, because we know that if 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 had to work very hard to reduce complexity and make many sacrifices, and eventually we got 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, and there was basically a new type of cryptography called zero-knowledge proofs, or zk-SNARKs. This allows you to create cryptographic proofs that prove certain mathematical properties, such as the data you own, without revealing any other information about that data. This was first used by Z.cash, a privacy-protecting cryptocurrency launched in 2016, which used zk-SNARKs to achieve privacy. How did 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 currency system that does not inflate excessively, 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. 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, including very interesting technologies like StarK, ZK Rollup, Cairo, and more. In fact, privacy could become another bottleneck, mainly due to legal issues and concerns about 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 top of Ethereum because hackers have used it.
Therefore, a concept called “proof of innocence” has emerged, with the goal of proving that your tokens are being 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 come from. In fact, a paper on this idea will be published soon. Several companies have already proposed different solutions. So there is a lot of work to be done in modifying the details to increase the confidence of exchanges in accepting tokens from users who use privacy systems without raising too much suspicion when depositing tokens into exchanges.
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 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 just started developing it. 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 because it doesn’t require running complex algorithms to optimize returns.
In terms of smart contract security, solving smart contract security issues may be the slowest progressing of these four issues because in 2017, just one year after the DAO hack, 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 the Ethereum community collaborated to return the money to the original owners of DAO.
At that time, it was the only similar event that happened on 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, many efforts in this regard have been successful. 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 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 terms of security.
In the months following the DAO incident, there was an event called the “Shanghai DOS Attack”, in which attackers exploited many vulnerabilities in the Ethereum protocol itself to slow down the entire blockchain. We spent several 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 four 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. Overall, 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 whole focus was on having no events. But sometimes it is important to remember that the absence of events is good news. Therefore, 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 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 move away from training wheels and became truly decentralized, taking an important step in this direction. Polygon has also taken a big step this year. This year, we are continuing to work on decentralizing these systems, enhancing the security of proof systems, making the proof systems faster, so that it takes only 5 hours to validate a block with CKDM proof, which may be reduced to 2 minutes in the future, and even 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 issue. There is also a lot of work in many other aspects, such as state trees (Verkle trees). 5 or 6 years ago, stateless clients were just an idea. Now, state trees have become a project with hundreds of people and thousands of lines of code, deeply considering how to apply them to Ethereum. It may only take 1 to 2 years to truly achieve it. 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 fundamentally 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 have multi-factor authentication. You can store keys in trusted hardware modules present in modern smartphones, or use hardware wallets, or even combine multiple hardware wallets together. You can use very complex methods such as email accounts for authentication, or even use email accounts as a way to authenticate Ethereum addresses.
Back to Reality and Practical Applications
Returning to the realm of reality and practical applications, one event that I often mention is an experience I had in Argentina around 2021. I was impressed by how many people were using Ethereum there, truly 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 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 cryptocurrencies more accessible for those who don’t have a banking system. Without DeFi, they wouldn’t have any other options, so I think providing these alternatives is good.
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 on this point. They have been becoming more and more decentralized. We are working hard to solve this problem, but the problem is that decentralized solutions like this don’t actually exist for people like that coffee shop owner. Even though it’s technically possible to be more decentralized, the decentralized solution doesn’t actually exist for these holders. So, it’s a big challenge for these people on-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 considered since 2013. Can we turn these concepts into truly beneficial applications that benefit people?
These technological works 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 practical 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 team, and client teams are no longer the only places where extremely important work is carried out. Wallet companies also play an extremely important role, as do application developers, 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 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 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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