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Ethereum co-founder Vitalik Buterin asserts that Ethereum still needs “three significant technical transitions” to reach its full potential as a technology stack – and anything less would be inadequate.
In a blog post published on Friday, the developer outlined the requirements for implementing each of his proposed enhancements, which may involve “substantial changes from applications and wallets.”
Scaling, Security, and Privacy
Buterin identifies Ethereum’s three transitions as layer-2 scaling (rollups), improved wallet security (smart contract wallets), and enhanced privacy – applicable to both standard fund transfers and various Ethereum applications.
“You can only choose 3 out of 3,” the developer noted. The failure of even one of these transitions would result in the entire protocol’s failure, as users would be motivated to turn to cheaper “centralized alternatives” that offer greater reliability and “somewhat conceal your data.”
However, these transitions will pose challenges: for example, the adoption of layer 2 protocols and stealth addresses will lead users to utilize significantly more blockchain addresses, disrupting the “one user ~= one address mental model” that the ecosystem has become accustomed to. This prompts Buterin to raise the following inquiries:
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“If you want to pay someone, how will you obtain the information on how to pay them?… If users possess numerous assets stored in various locations across different chains, how do they manage key changes and social recovery?”
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Each transition will also necessitate updated secondary infrastructure. “Using ENS is costly,” Buterin remarked, referring to the Ethereum Name Service – a system that assigns human-readable names to blockchain addresses.
During a bull market, Buterin predicted that the fees for registering a domain name could rise above $100 again. Fortunately, ENS has been working on tools to enable its system to function on L2, which will facilitate the “nearly-free” domain registration essential for “people to actually utilize ENS.”
“Radical reforms of the type we require are indeed feasible,” Buterin stated, “But there is still a significant amount of application-layer reform that must be accomplished.
Ethereum’s Core Use Cases
In December 2022, Vitalik considered Ethereum’s viable use cases, asserting that “money” remains the most crucial application ever identified for blockchain.
Other applications, such as decentralized finance (DeFi), continue to hold relevance, provided they adhere to straightforward over-collateralized loan products and do not evolve into an “overcapitalized monster” dependent on unsustainable yield farming practices.
However, some concepts are not practical:
“Industrial supply-chain applications have not progressed,” he noted at the time. “Decentralized Amazon on the blockchain has yet to materialize.”
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