🔮 Future In Flux — Issue No. 68

📰News

This week, a broad swath of the cryptocurrency community met in Osaka, Japan for Devcon, a mega-conference hosted by the Ethereum Foundation. While attending and speaking at the conference, Ethereum co-creator Vitalik Buterin somehow found time to author six posts about the future of the network. It is beyond me how Vitalik manages to produce well explained insights at the rate he does. In this edition of the newsletter, I'll break down just four of the pieces he wrote this week. Let's dive in.

The first of Vitalik's posts detailed a possible plan to transition Ethereum 1.0 into Ethereum 2.0. As you'll remember, ETH 2.0 will be a brand new network with completely new features, including Proof-of-Stake consensus and lateral scaling via shards. ETH 2.0 will roll out in three phases, the first of which is planned for early next year. While it will immediately be possible to transfer Ether to the new network, no other communication can occur between the chains. In this post, Vitalik explains that when Ethereum 2.0 is fully launched, it may be possible to move all the state stored on Ethereum 1.0— including balances, tokens, and smart contracts— into a shard on the new network. Link.

Before such a transition, it will be possible for ETH to flow from the old chain to the new one, but not vice versa. That doesn't mean it's impossible to build a two way bridge between the networks. In another post, Vitalik lays out two methods for building such a bridge, and the tradeoffs involved in each. While he explains how it could be done, Vitalik also notes that this work is not currently viewed as a priority. Link.

Another one of Vitalik's posts explored reducing the number of shards from 1,024 to 64. Why the drastic change? One of the downsides of shards— which are basically each their own blockchain with shared consensus— is that communication between the shards is slow. The Ethereum 2.0 design includes a "Beacon Chain" that coordinates between shards by periodically creating blocks that connect any two of them. By reducing the number of shards— and thus the number of shard-to-shard connections— the Beacon Chain can connect every shard on every block, enabling faster inter-shard transfers. This comes at the cost of total throughput. It would also require the Beacon Chain to produce blocks more slowly. Link.

Speaking of the Beacon Chain, and of continued flux in the Ethereum 2.0 spec, Vitalik had yet another post detailing so called "On Beacon Chain Saved Contracts." The proposed feature would allow Ethereum 2.0 to offer an expensive way for smart contract code to be deployed to the Beacon Chain itself. Since every shard knows about the Beacon Chain, smart contracts in each shard would be able to access this code. This is especially helpful in reducing state duplication of code that is likely to be used in many shards. An example would be the interface for an ERC-20 token contract. Many such tokens are likely to be deployed across virtually every shard, so moving the implementation to the Beacon Chain would greatly reduce shard state. Link.

There are two ways to interpret the prolific pace at which Vitalik, and the entire Ethereum 2.0 research team, is iterating on the design space of the network's future. One is a positive view and the other is more negative. Let's explore each in turn.

First, the positive take. Vitalik is a genius, and his brainpower is fixated on making Ethereum 2.0 the best it can be. When I say "genius," I mean it in a grounded but sincere way. He's not infallible. He's still human. His involvement doesn't guarantee Ethereum's success. Yet, in a space filled with people who like to pretend they're smarter than they are, Vitalik is the real deal. It's hard to find anyone you'd rather want working on the future of your network.

The rosy take, then, is that all these iterations represent the hard work of very smart people building the future of Ethereum. What's the more gloomy interpretation? Put simply, it's a bit alarming that a project aiming to launch its first phase early next year is still so unclear about its final form. Could these constant changes be a symptom of a deeper problem? Perhaps the system being proposed is too intricate, and there are just too many edge cases to chase down.

A true pessimist would view the articles penned by Vitalik this week not as eloquent or impressive, but as the flailing machinations of a project at serious risk of being crushed under the weight of its own complexity. I don't go nearly that far, but as I've said before, my engineering "spidey senses" are still tingling. I'm rooting for Ethereum 2.0 to succeed, and I acknowledge the intelligence and effort of the teams working on it, but I also remain somewhat skeptical. It's an extremely ambitious project. By definition, then, there are a lot of risks.

With that said, there are a lot of reasons to be optimistic about ETH 2.0, and Ethereum more generally, including many that were showcased for the first time at Devcon this week. It simply wasn't possible to cover all the things that piqued my interest in one newsletter. Stay tuned! I'll be breaking down more these announcements in the coming weeks.

📊Statistics

224. The volume in BTC of Bitcoin futures traded on Bakkt— a physically settled Bitcoin futures market— on Thursday, October 10th. This represents the highest single day volume since the futures market launched last month. Bakkt was hyped a potential driver of "big money" investment in the lead up to it's launch, but to date, volume traded there has been relatively insignificant, as shown in the chart below. Link.