Ethereum founder Vitalik Buterin delivered a speech at ETH Hong Kong 2023, the city’s first Ethereum community-owned gathering, on October 22-24, 2023. The event, organized by Scroll and Newman Capital, featured 50+ industry experts and attracted developers, builders, investors, and blockchain enthusiasts from the region.
Two key issues: staking centralization and transaction processing efficiency
Buterin addressed the challenges and opportunities facing the Ethereum platform, which is transitioning to a Proof of Stake (POS) consensus mechanism and implementing Layer 2 (L2) solutions for scalability and efficiency. He highlighted two key issues for the POS system: staking centralization and transaction processing efficiency.
Staking centralization refers to the risk of a few large entities controlling a majority of the stake and influencing the network’s security and governance. Buterin suggested that incentives and penalties should be designed to discourage such behavior and encourage more participation from smaller stakers. He also proposed a dynamic validator set size that adjusts according to the demand for staking.
A flexible fee market that adjusts to the network congestion and demand
Transaction processing efficiency refers to the trade-off between security and speed in validating transactions on the network. Buterin explained that different types of transactions have different levels of importance and urgency, and that the network should prioritize them accordingly. He also advocated for a flexible fee market that adjusts to the network congestion and demand.
Issues to be addressed
Buterin also identified four issues that need to be addressed for L2 solutions to be successful. L2 solutions are protocols that run on top of the Ethereum network and provide faster and cheaper transactions. The four issues are:
- Data availability: ensuring that the data needed to verify transactions on L2 is accessible and secure on L1 (the Ethereum network).
- Interoperability: enabling seamless communication and interaction between different L2 protocols and L1.
- User experience: improving the usability and accessibility of L2 solutions for end-users and developers.
- Security: ensuring that L2 solutions are resilient to attacks and can recover from failures.
A balance between decentralization
In his concluding remarks, Buterin emphasized that maintaining a balance between decentralization, scalability, and security is crucial for moving the blockchain industry forward. He said that Ethereum is committed to achieving this balance and providing a platform for innovation and collaboration in the Web3 space.