'Ethereum Fails' Without These 3 Changes, Says Vitalik Buterin

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If Ethereum is to expand how it's used, it will need to undergo three major transitions or risk undermining its own future, said Ethereum co-founder Vitalik Buterin.

In a blog post published on Friday, Buterin laid out his ideas for what it will take to help Ethereum mature if it is to expand in use. Calling them “The Three Transitions,” Buterin said they would need to evolve around transitions in layer-2, or “L2,” scaling solutions, a move to smart contract wallets, and greater privacy for fund transfers.

Buterin’s proposals bump into what has been called the "blockchain trilemma." A blockchain's most important traits are being decentralized, secure, and scalable, but it can only usually achieve two of these three.

To overcome this, Buterin said that it is acknowledged that these transitions would be challenging to coordinate, but said they were needed for Ethereum to survive.

Of the three, Buterin singled out a need to expand use of L2 solutions called “rollups” as an important part of this transition. An ordinary L2 function processes transactions off of the main Ethereum blockchain, or the L1.

A rollup is a scaling solution that bundles these transactions and then validates a proof of them as a much smaller piece of data on the mainnet to keep it from getting too clogged. As a result, the cost of an Ethereum transaction can be lower.

"Layer 2s are critical to the success of Ethereum’s vision of the world computer. Without L2s, Ethereum won’t scale," CEO of OP Labs and co-founder of Ethereum scaler Optimism Karl Floersch told Decrypt. "Without scale, Ethereum will never be able to support the world’s compute demand, and until the world’s compute is fully supported, we can’t fully realize Ethereum’s vision."

Critically, said Buterin, the version of Ethereum that does not address the move to rollups "fails," adding that transaction costs would only surge in the face of a bull run and encourage more centralization on its blockchain.

"The solution isn't simply 'move users off of mainnet.' Rather, the solution lies in extending the capabilities of the Ethereum network," Floersch said. "This means that instead of thinking about it as a migration from mainnet, we can think about it as load balancing the demand for Ethereum mainnet with other highly secure OP chains."

Bringing Ethereum from the edge

Eli Ben-Sasson, co-founder of the Israeli-based company StarkWare behind layer-2 scaling solutions StarkEx and StarkNet, said Buterin was “right” in his diagnosis of what it would take to see an expanded Ethereum.

He said his company was already using the smart contract wallets as part of its StarkNet, and believes more of this type of scaling is “over the horizon.”

“Having the leadership from Vitalik which both appreciates the excitement of this moment and urges the community to get on board is a big part of what will propel Ethereum’s success,” Ben-Sasson told Decrypt.

Buterin said the move to smart contract wallets has some "technical issues" to work through but is "not a large burden" to address.

With a smart contract, contracts automatically execute their terms when predefined conditions are met, and Buterin said they would make some processes easier like covering transactions for non-ETH tokens.

Of the three transitions, Buterin expressed concern that meeting privacy concerns would be among the bigger challenges. He said that without enough data privacy measures in place, users concerned about this will stay away from Ethereum.

“Without [privacy], Ethereum fails because having all transactions available publicly for literally anyone to see is far too high a privacy sacrifice for many users," said Buterin.

To address this, Buterin suggested using "stealth address" to help protect user identities, but these methods are still maturing because of issues around cost and functionality.