Vitalik Buterin, co-founder of Ethereum, has expressed his views on incorporating specific protocols into Ethereum’s code versus keeping them “on top” of the blockchain. In a recent blog post, he delved into the historical evolution of the network’s approach to protocol complexity and its implications.
Ethereum’s Evolving Protocol Approach
Initially, Ethereum aimed to maintain a simple core protocol, pushing most functionalities to user-created contracts on the blockchain. The ongoing debate between Layer 1 (L1) and Layer 2 (L2) solutions encompassed scalability and user requirements such as digital asset exchange, privacy, and security.
Ethereum 2.0 originally envisioned a protocol as a minimal virtual machine with flexibility for users to customize transaction validation logic, called account abstraction. However, this approach raised complexities, exemplified by EIP-86, which shifted complexity to miners’ logic. EIP-86 evolved into EIP-2938, introducing new complexities into the protocol.
To address these challenges and reduce protocol complexity, EIP-2938 transitioned into ERC-4337, an external Ethereum Request for Comment (ERC). Integrating ERC-4337 into the Ethereum protocol is being considered for several reasons:
ERC-4337 integration brings multiple benefits to the protocol, including improved gas efficiency, robust code bug mitigation, standardization of EVM OpCodes, and increased censorship resistance by enhancing user operation transparency.
Gas efficiency is crucial, as ERC-4337 transactions currently incur higher costs due to individual storage read/write and logic execution. Enshrining this functionality would provide universal access to shared libraries without fees.
Enshrining private mem pools, which keep transactions encrypted until inclusion in a block, aims to counter issues like frontrunning. Various encryption technologies, such as time-lock encryption and threshold encryption, have drawbacks, making in-protocol enshrinement challenging.
Liquid staking, another concern in the Ethereum community, addresses users’ desire to stake ETH for DeFi and collateral simultaneously. Liquid staking providers like Lido and Rocketpool offer solutions, but centralization risks persist.
The debate centers on whether to enshrine liquid staking functionality in the protocol. Various options, including limiting slashing penalties and adjusting node operator requirements, are under consideration.
Factors like complexity, costs, bug response, protocol powers, and censorship resistance are important when deciding to add features to a blockchain protocol. Balancing flexibility and enshrinement is crucial, as some features need protocol integration while others benefit from decentralization.
However, the debate on feature enshrinement in blockchain protocols is multifaceted. Ethereum’s approach has evolved over time, emphasizing the importance of judicious enshrinement, flexibility, and adaptation to emerging needs and technologies.