Editor | Stephanie/Franci, ECN
Editor’s Note:
Happy New Year, fellow readers of the ECN community!
2022 is about to pass. Looking back on the past year, the Ethereum community has experienced both pain and joy. We may have experienced anger and frustration in the face of black swan events again and again; we may have watched the merger party with like-minded friends; we may have gone to Devcon VI in Bogota to experience this grand event after many years, or followed every wonderful speech online; we may have been amazed by the technological innovations fostered by the community; we may have been excited by DeSoc’s innovative ideas...
There are so many unforgettable moments in 2022 that we made some choices when selecting materials. In this 2022 Ethereum annual review article, we selected 9 events and topics that are most worth recording, sorted them out and summarized them, hoping to help everyone bring some memorable points when looking back on 2022. In addition to the events summarized by ECN, what unforgettable memories do readers have? Welcome to share with us~
Ethereum Merger
At 14:42 Beijing time on September 15, Ethereum merged successfully. After 8 years of exploration, research and testing, Ethereum finally switched from the PoW consensus mechanism to PoS. I believe there will not be much objection to saying that the Ethereum merger is the most important event for Ethereum in 2022.
The Ethereum merger is epoch-making.
In terms of implementation difficulty, it is the most complex upgrade in Ethereum's history. It is the result of collaboration among nine independent client teams at the consensus layer (Prysm, Lighthouse, Teku, Nimbus and Lodestar) and the execution layer (Geth, Nethermind, Besu and Erigon). It is "hot swapping" that is achieved while Ethereum remains running.
In terms of the significance of Ethereum itself, the merger makes Ethereum more secure, more sustainable, and lays the foundation for Ethereum's future scalability. Although there is no consensus in the cryptocurrency world on which one is safer, PoW or PoS, the Ethereum Foundation research team believes that PoS is safer based on their research and understanding of these systems and their understanding of various attacks. What is basically undisputed is that the switch to PoS has reduced Ethereum's energy consumption by more than 99.95%, which has removed a major stumbling block for Ethereum to enter the mainstream world, making applications such as NFT, DAO, and DeFi easier to enter the lives of the general public. In addition, the use of PoS lays the necessary foundation for the subsequent sharding expansion of Layer1 in terms of architecture.
After the Ethereum merger, Ethereum’s next major upgrade will focus on improving Ethereum’s scalability.
Sharding matures
Sharding is seen as the future of Ethereum scalability. According to Vitalik, sharding is the key to enabling the Ethereum ecosystem to achieve thousands of transactions per second. The Ethereum community has been discussing sharding since 2013, and the sharding plan has been revised many times. In 2022, with the introduction of the Danksharding plan, Ethereum's path to sharding has become clear and feasible.
Regarding Ethereum's sharding solution, the more well-known version was at a seminar in Taipei in 2018, where researchers and core developers from the Ethereum Foundation unified proof-of-stake and sharding research and formed a three-phase "Ethereum 2.0" roadmap:
Phase 0 brings the Beacon Chain
Phase 1: Joining Data Shards
In phase 2, virtual machines are added to each shard to implement computations in the system.
The number of shards was initially set at 100, then increased to 1024, and in this version of the roadmap it was lowered to 64.
The sharding mechanism adopted in this version of the roadmap refers to the horizontal partitioning of the database, that is, each shard chain has a subset of nodes working on that chain. Each of the 64 shard blocks has its own proposer and a committee randomly assigned from the validator set, who independently verify the available shard data. In this design, all shards cannot be verified as a whole, and each proposer has the ability to disrupt the entire process. Shuffling validators between shards is also quite troublesome. And it is difficult to guarantee that voting can be completed in a slot unless very strict synchronization assumptions are introduced.
Obviously, there are still many unresolved issues to achieve execution sharding in Phase 2 of "Ethereum 2.0". At the end of 2020, Vitalik published an article called "What will a rollup-centric Ethereum roadmap look like?", which mentioned that in the long run, under a rollup-centric Ethereum roadmap, when everyone moves to rollup, Ethereum's TPS can reach about 3000, and when rollup is transferred to the shard chain as data storage, Ethereum's TPS theoretical maximum can reach 100,000. In other words, the path to eth2 can be completed by Phase 1.5, and the Ethereum base layer will focus on doing two things well - consensus and data availability. And sharded data availability is much safer than sharded EVM calculations.
In this context, after a year of exploration, Dankrad Feist, a researcher at the Ethereum Foundation, proposed a new sharding scheme at the end of 2021. This scheme was valued and recognized by the community in 2022, and in order to distinguish it from the old sharding scheme, the new sharding scheme was named after Dankrad - Danksharding. Danksharding is based on two new research advances - PBS and crList, which aim to solve MEV and censorship problems. Unlike previous sharding schemes, in the Danksharding scheme, only one proposer chooses to enter all transactions and data of the slot, making the integration of Layer1 and rollup closer and greatly simplifying the original sharding scheme.
In 2022, the Ethereum community made considerable progress in the research and development of Danksharding. Vitalik and other researchers proposed proto-danksharding (ie EIP-4844), a proposal to implement most of the logic and scaffolding of the full Danksharding specification, which mainly introduced a new transaction type - transactions carrying blobs.
In addition to the merging work in 2022, the implementation of proto-danksharding has also become the focus of client developers in the second half of the year. Currently, EIP-4844 has specifications for the execution layer and consensus layer, and has launched two developer test networks. The KZG ceremony required for the implementation of EIP-4844 has launched a public contribution test website, and the official version will be launched in the new year of 2023.
According to the last AllCoreDevs meeting in 2022, EIP-4844 will be included in the next Cancun upgrade after the Shanghai upgrade.
Related Reading:
《Unveiling the advantages of “sharding” from a technical perspective》
《Ethereum Roadmap Centered on ROLLUP》
《New, Dramatically Simplified Sharding Design》
《Vitalik: Proto-Danksharding FAQ》
FTX, the world’s second largest centralized exchange, collapsed. What will happen to the safety of user assets?
On November 11, FTX, the world's second largest centralized cryptocurrency exchange, declared bankruptcy, and the entire blockchain ecosystem fell into a complex emotion of shock, anger, sadness, etc. The asset gap of up to 8 billion has left countless users and some institutions associated with it with nothing. The process from the exposure of the incident to the final declaration of bankruptcy happened so quickly and dramatically that many implicated users had not had time to digest the successive revelations and react, and FTX suddenly restricted user withdrawals.
What was the cause of the incident? At first, on November 2, CoinDesk revealed in a news report that the balance sheet of Alameda Research, a cryptocurrency quantitative trading company also founded by SBF, showed that among its assets worth $14.6 billion, a large part of them were FTT, the platform currency issued by FTX, or assets that were borrowed with FTT as collateral. For a time, the community's discussion on this revelation intensified, and the participation of Binance founder CZ made the whole thing more like a confrontation between two forces. Then, FTX could not bear the withdrawal run of users, fell into a liquidity crisis, stopped user withdrawals, and declared bankruptcy... On December 13, SBF was officially arrested in the Bahamas, and was subsequently extradited to the United States to await trial, which temporarily put an end to this farce.
Here we only describe the FTX incident itself, and the domino effect caused by this black swan incident is even more terrible or there are still many unrevealed. Crypto researcher Molly White made a diffusion relationship diagram of FTX, showing the financial relationship between FTX and different institutions.
cr: mollywhite.net (partially extracted)
Asset security is a topic that can never be avoided in the blockchain field, and 2022 is another year of disasters for users on and off the chain: frequent cross-chain attacks, Luna-UST returning to zero, Three Arrows Capital and Celsius successively bursting... The collapse of FTX is undoubtedly the most incredible black swan event this year. Obviously, the root cause of FTX's failure is the private misappropriation of users' assets, which led to its final insolvency. However, before this incident was disclosed, I am afraid that few people would believe that such a thing would happen to FTX, the world's second largest exchange. This can't help but sound the alarm for the entire crypto circle: How to ensure the security of users' assets?
If the degree of asset custody is regarded as a spectrum, then the two ends of the spectrum are fully custodial CEX and non-custodial DEX. Both custody methods have their own advantages and disadvantages:
cr: vitalik.ca
Of course, we can do much more than just choose between CEX and DEX. There is still a range of options in the middle of the spectrum waiting for us to explore and develop.
Vitalik wrote an article analyzing how to make centralized exchanges more secure. In this article, we can see more possibilities for exploring centralized exchanges: using Merkle trees and even cryptographic technologies such as ZK-SNARK to achieve proof of solvency, research directions for non-custodial centralized exchanges...
By introducing Account Abstraction and Multi-Party Computing (MPC) technology, we can realize functions such as wallet social recovery, Web2 social media account login, etc., and further improve the user experience of decentralized asset custody solutions.
For a long time in the future, centralized exchanges and decentralized exchanges will continue to coexist, and the technology and research that promote the two types of solutions should go hand in hand, so that the middle of the spectrum of asset custody will be filled with more possibilities.
Related Reading:
Building Secure Centralized Exchanges — Proof of Solvency and More
DeSoc in the making
People in the Ethereum community must have heard of SBT (Soulbound Token) in 2022. It has appeared in major hackathon entries, financing news, and track analysis articles related to Web3 digital credentials and identity systems...
This wave of enthusiasm originated in mid-May 2022, when Vitalik, lawyer Puja Ohlhaver, and economist E. Glen Weyl jointly published a paper titled "Decentralized Society: Finding Web3’s Soul". This paper points out the various problems that exist in the current Web3 world. Sybil attacks and collusion are rampant in the virtual world. Only transferable assets make the DeFi ecosystem unable to support the most mundane activities in the real economy. The Web3 world faces problems such as super-financialization, wealth concentration, and governance vulnerable to financial attacks.
The authors believe that the lack of Web3 native identity is the key to these problems, so they proposed two Web3 primitives: SBT and Soul (account or wallet of "soul-bound token"), where SBT refers to publicly visible, non-transferable (but revocable by the issuer) tokens stored in Soul, which can represent commitments, credentials and affiliations, while Soul is the account or wallet where SBT is stored. They hope that under the identity paradigm formed by SBT and Soul, Web3 can move towards a decentralized society (DeSoc) with co-determined sociality, soul and community convening and collaborating from the bottom up.
Once the paper was published, it became the "hot topic of the town", and the community's exploration of SBT and Soul implementations emerged in an endless stream. Currently, there are multiple SBT standards proposed in EIP, which are in the Draft, Review or Final stage. As of November 2022, there are two ERCs in the Final stage - ERC-5192 "Minimal Soulbound NFTs" and ERC-5484 "Consensual Soulbound NFTs". Both ERCs use non-transferability as their core function. The difference is that ERC-5192 adds additional technical parameters to detect the state of transferability, while ERC-5484 focuses on the mutual consent between the issuer and the recipient. Other EIPs include:
EIP-4671: Non-Tradable Tokens Standard (Draft)
EIP-4973: Account-bound Tokens (Review)
EIP-5114: Soul Badge (Draft)
EIP-5727: Semi-Fungible Soulbound Token (Draft)
EIP-5516: Soulbound Multi-owner Token (Review)
EIP-5633: Composable Soulbound NFT, EIP-1155 Extension (Draft)
In addition, projects, platforms, and protocols related to Web3 digital credentials, identity systems, reputation systems, and account abstraction have also received attention from the community and favor from investment institutions.
In 2022, teams and companies of all sizes in the Ethereum community will participate in the construction of the DeSoc ecosystem. Although we cannot see the prototype of DeSoc yet, this ecosystem is full of vitality and is expected to make breakthrough progress in 2023!
Related Reading:
Decentralized Society: Finding the Soul of Web3
Zero-knowledge proofs have attracted much attention, and the ZK-EVM track is highly competitive
When it comes to the most powerful cryptographic technology born in the past decade, zero-knowledge proofs must be mentioned. In the blockchain field, they have two major application scenarios: scalability and privacy.
At the opening ceremony of Decon VI on October 11, a panel titled "What to Know About Zero Knowledge" was held. As one of the guests, Vitalik said: "I think ZK is a natural complement to blockchain. The reason for this is that I think the anti-censorship characteristics provided by blockchain are at the expense of two very important properties: scalability and privacy. ZK-SNARK is a technology tailor-made for these two properties."
The importance of ZK-SNARK/STARK to the Ethereum protocol layer is reflected in the roadmap updated in November this year.
cr: @VitalikButerin (Chinese translation)
In this part of the work (The Verge), the ultimate goal is to introduce a trustless or trust-minimized node solution (making light clients eventually feasible) to make block verification a super simple thing. And all of this is based on zero-knowledge proof technology. In the roadmap, the realization of Ethereum based entirely on SNARK requires the following three milestones:
SNARKs for Verkle proofs;
SNARKs for consensus state transitions;
SNARKs for L1 EVM
In addition, since the beginning of this year, there has been fierce competition for ZK-EVM solutions in the field of Ethereum expansion, which are currently roughly divided into four categories of ZK-EVM.
Type 1: Fully Ethereum-equivalent ZK-EVM (Privacy and Scaling Explorations team, Taiko)
Type 2: Fully EVM-equivalent ZK-EVM (Scroll, Polygon Hermez)
Type 3: Almost EVM equivalent
Type 4: high-level-language equivalent (ZKSync, StarkNet)
It is worth noting that the zk proof outsourcing and decentralized proof network proposed by Scroll will bring about an emerging research direction and hardware market for hardware acceleration of "proof generation". I believe that the general ZK-EVM solution will shine next year.
Related Reading:
Different Types of ZK-EVM
2022 Updated Ethereum Roadmap
MEV-Boost’s Compliance and Decentralization
In 2021, Vitalik and researchers from the Ethereum Foundation proposed a specific design for the Proposer/Builder Separation Scheme (PBS) to solve the MEV problem. In November of the same year, the Flashbots team proposed MEV-Boost based on the design of PBS for the merged Flashbots architecture, which can be seen as a prototype of PBS. The Flashbots auction architecture allows validators to outsource block construction to a third-party block builder network, but puts the mev-boost relay in a trusted position - both block builders and proposers need to trust the relay.
In early September 2022, Flashbots' MEV-Boost relay went online. After the merger, validators connected to MEV-Boost can obtain MEV income in addition to validator rewards.
Adoption rate of mev-boost, source: https://dune.com/queries/1279670/2192739
As can be seen from the above figure, after the merger, the adoption rate of mev-boost by validators has climbed to nearly 90%. What is worrying is that in August of this year, OFAC (Office of Foreign Assets Control of the U.S. Treasury Department) sanctioned Tornado Cash, which undoubtedly had a chilling effect on companies in the crypto industry. Long before mev-boost went online, Flashbots stated that "Flashbots' relays and builders are and will be subject to OFAC regulations." In other words, validators on Ethereum who use Flashbots mev-boost relays are under review.
After the merger in September, Flashbots relays accounted for 84%, which introduced a critical centralization crisis to Ethereum infrastructure. Fortunately, in order to promote the Ethereum network in a healthier direction, the Flashbots team has successively open-sourced MEV-Boost, sync-proxy, and block builder API. As more teams joined the competition in the MEV ecosystem, including relays that explicitly claimed that they would not conduct censorship, the proportion of Flashbots relays fell to less than 80% in December.
In addition, the Flashbots team also announced the SUAVE (Single Unified Auction for Value Expression) plan in late November to promote the decentralization of MEV. SUAVE unbinds the roles of transaction pools and block builders from existing blockchains and provides a highly specialized and decentralized plug-and-play option that allows block builders to share the same sorting layer.
Although the centralization crisis and censorship issues brought about by the Flashbots MEV-Boost relay still hang over the Ethereum community, the diversification of the MEV ecosystem has been gradually improving. The Flashbots team has launched a plan to promote the decentralization of MEV, and the in-protocol PBS that can better solve the MEV problem will continue to be promoted next year.
Related Reading:
Flashbots architecture MEV-Boost for merging and its implementation plan
《Fee market design that is friendly to proposer/block builder separation》
《Vitalik: Proposer/Builder Separation for Two Slots》
Optimistic rollup solution launched #L222, the first year of ecological application
Although many L2 solutions have launched their mainnet in 2021 or even earlier, 2022 is the year when the L2 ecosystem will explode in terms of the deployment of general L2 technology ecosystems and applications. As of December 31 this year, the total locked value of L2 has exceeded US$4 billion.
cr: l2beat.com/scaling/tvl
The user interaction activity on L2 is gradually on par with that of the Ethereum mainnet. The following chart is from Orbiter Finance L2 Data: the blue line represents the number of Ethereum mainnet transactions, and the red line represents the number of L2 transactions.
cr: orbiter.finance/data
Among the L2 solutions that make up these data, Arbitrum and Optimism, two mainstream solutions that both use Optimistic Rollup technology, account for ~80% of the total share.
cr: l2beat.com/scaling/tvl
Arbitrum opened its mainnet beta version to the public and lifted the whitelisting system on September 1 last year. This year, Arbitrum has made two major updates:
Launched Nitro, an iterative version of Arbitrum One, which further improves the original version in different aspects, including providing higher efficiency, less latency, stronger activity guarantees, and better compatibility.
Arbitrum Nova, an off-chain data availability solution based on AnyTrust technology, was launched to meet the needs of some applications for higher scalability (such as the gaming industry), but at the same time it will bring additional minimal trust assumptions.
Optimism officially removed the whitelist restrictions on December 17 last year and opened up permissionless deployment. In terms of protocol development, this year Optimism mainly optimized and upgraded the overhead to reduce transaction fees by at least 40% and improve user experience; launched the testnet of the next iteration of Bedrock, in which the next generation fraud proof system Cannon will be introduced. In terms of governance, Optimism has also made some innovations: issuing the token OP, introducing the Optimism Collective and establishing the Optimism Foundation. Optimism is jointly governed by the Optimism Foundation (an organization registered in the Cayman Islands) and members of the Optimism Collective. Among them, the Optimism Collective is jointly governed by two houses, Citizens' House and Token House.
Token House was established through token airdrops to build the first community members. OP token holders will be able to vote on protocol upgrades, project incentives, governance funds, etc.
Citizens' House will facilitate and govern the distribution of retroactive public goods funds, which will be collected from the network's profits. Citizenship will be granted through "soulbound" (distributing NFTs), and as the Optimism community grows, the citizen group will continue to expand. Citizens' House is a tool that enables the distribution of power from any centralized organization to a non-consortium-centered group of individuals.
Next year, in addition to the update and iteration of the protocol performance itself, Optimistic Rollup and even the entire Rollup ecosystem will explore and practice more in the decentralization of Rollup. Ethereum co-founder Vitalik Buterin first proposed the use of multi-provers to strengthen the Rollup system at the Rollup Day event held by Scroll on October 11, and then posted a post in the Ethereum Magicians forum proposing "three stages of removing the training wheels of rollup." These basic principles provide some important ideas for the decentralized innovation and practical exploration of rollup.
Related Reading:
《Using multi-provers to strengthen the Rollup system》
The three stages of removing the rollup training wheels
Tornado Cash sanctions and regulatory turmoil
On August 8, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a virtual currency mixing platform. The sanctions bill stipulates that any U.S. citizen, resident, or company that conducts trade, economic transactions, or "other transactions" with individuals, companies, and countries on the sanctions list (including Tornado Cash) will be considered illegal, and according to U.S. federal regulations, they may face heavy fines and imprisonment.
For a while, there were endless discussions in the community about "what does the OFAC sanctions bill mean". Especially at that time, Ethereum was about to switch from PoW to PoS consensus, and the possible impact of Tornado Cash's OFAC sanctions on the merged Ethereum PoS mechanism caused widespread discussion in the community: For Ethereum's US miners and validators, if they generate (or verify) an Ethereum block containing a transaction that contains one of the Ethereum addresses in the SDN list, does it violate OFAC sanctions?
At the time, it was noted that it looked like over 66% of beacon chain validators would comply with OFAC sanctions. (Lido, Coinbase, Kraken, Staked, and Bitcoin Suisse have over 60% of their validator node networks) This could lead to censorship at the base layer/protocol level.
Later, in an All Core Devs on August 18, Ethereum core developers discussed the topic of "how to deal with censorship attacks on the network." Developer @tkstanczak said that ideally, he would prefer to see responses to these things happen at the social level rather than the protocol level. Marius emphasized that although it is difficult to get a team/organization to commit, the individual's voice is also important. He said that anti-censorship is his personal mountain to defend, and if Ethereum cannot be censorship-resistant, he will leave Ethereum.
Earlier, in a poll initiated by @ercwl for the Ethereum community: If most of the pledgers choose option A in the above vote, what would you do:
X) Treat censorship as an attack on Ethereum and expel these nodes from the network through Ethereum community consensus
Y) Tolerating censorship
Vitalik said he supports option X.
Anti-censorship is undoubtedly a problem that the Ethereum community needs to think about and solve for a long time. Fortunately, in the face of censorship at different levels, the Ethereum community has already had response plans at least in the research stage, such as PBS, MEV-Smoothing, and encrypted transaction pools written into the protocol layer. In addition to Ethereum's core developers, anti-censorship work also requires the active participation of various teams in the Ethereum ecosystem.
Bogota Devcon
Since Devcon V was held in Osaka, Japan in 2019, due to the epidemic, Devcon VI was finally held again in Bogota, Colombia, South America on October 11, 2022.
Devcon is the only annual conference held by the Ethereum Foundation and the largest event in the Ethereum community. The long-awaited Devcon VI ushered in an unprecedented event. The conference received more than 1,200 speaker applications. During the four days of Devcon, 60,000 people around the world watched the live broadcast, and more than 20,000 people watched it on the first day alone. The theme of Devcon is no longer limited to technology-led, and new themes such as "Opportunities & Global Impact" and "Governance & Collaboration" have been added, among which "Opportunities & Global Impact" has become the most popular theme category. Representatives from UNICEF (United Nations Children's Fund) and Internet Archive gave speeches at Devcon VI, showing the growing influence of Ethereum in helping the "real world" overcome the "gap across cultures, ethnicities and economic classes".
The 2022 Bogota Devcon is undoubtedly a carnival for the global Ethereum community, where everyone gathers to collaborate and share knowledge, communicate and generate new ideas, grow the Ethereum community and have fun together, leaving a deep impression on every participant on site.
So, which city will Devcon VII be held in 2023? Let's take a look at the candidate list: https://forum.devcon.org/c/devcon-7-location-suggestions/14
