New Ethereum Staking Model in Works

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By A D

Ethereum’s co-founder, Vitalik Buterin, is at it again, pushing the boundaries of blockchain innovation. In a groundbreaking proposal, Buterin introduces a revolutionary two-tier staking model that aims to address centralization concerns and significantly boost decentralisation efficiency and security within the Ethereum network.

Ethereum currently faces challenges related to its staking system. These challenges include limitations in selecting node operators across staking pools and inefficiencies in the Layer 1 consensus mechanism. Solo staking constraints and issues with liquid staking have further constrained the platform, limiting its capacity to process only 100,000 to 1 million BLS(Boneh-Lynn-Shacham)  signatures per slot. Additionally, accountability in signing transactions becomes a hurdle as Ethereum scales, potentially falling short of accommodating millions of stakers.

The Two-Tier Staking Model

Inspired by projects like Rocket Pool and Leo, Vitalik Buterin’s proposal suggests adopting a two-tiered staking system to address these issues. The model consists of two tiers:

  • High-Complexity Slash Tier: In this tier, participants are highly active but limited in number, approximately 10,000. They face a higher risk of slashing but play a central role in the network’s operation.
  • Low-Complexity Tier: Here, members engage sporadically and face minimal or no slashing risk. This tier aims to include a broader range of participants in the network’s staking process.

Buterin proposes modifying the validator balance cap and implementing a balance threshold to categorise validators into these tiers. Additionally, he outlines potential roles for small stackers, such as random selection for slot signing and delegators offering to serve as small stackers for a set duration.

Delegators play a crucial role by signalling their availability and receiving confirmation from both the node and a randomly selected delegator. They publish inclusion lists for block validation, addressing concerns about potential 51% node operator majorities attempting transaction censorship.

Implications and Vision for Ethereum’s Future

Vitalik Buterin’s proposal envisions Ethereum’s future as more than just a technical fix. It aims to empower individuals who lack the resources for solo staking, granting them meaningful participation opportunities. Moreover, the proposal aims to reduce the transaction processing load on Ethereum’s consensus layer while making it easier for anyone interested to run a validating node.

Beyond decentralisation concerns, the two-tier system promises to fortify security within staking pools. It establishes a formidable barrier against potential attackers by allowing delegators to select node operators. Aspiring node operators without delegator support would need to commit a significant portion of their ETH, potentially exceeding 2.08 million ETH. This imposing cost acts as a powerful deterrent against hacking attempts.

The ultimate goal of this proposal is to provide a more accessible and inclusive platform for those interested in participating in Ethereum’s staking process. These refinements underscore the need for strategic protocol modifications, which could lead to a balanced, decentralised, and highly functional Ethereum network.

Ethereum’s Post-Merge Odyssey

Ethereum has undergone a remarkable transformation post-merge, achieving milestones that have reshaped the blockchain landscape.

The Surge phase, which followed the merge, catapulted Ethereum into a new era of scalability. Sharding and a series of crucial upgrades were seamlessly integrated, expanding Ethereum’s transaction-processing capacity to an astonishing 100,000 transactions per second. This surge in throughput has revolutionised the blockchain landscape, making Ethereum a frontrunner for mainstream adoption.

The Verge stage brought Ethereum closer to its vision of decentralisation for all. Stateless nodes became a reality, allowing individuals to participate in the network without the burden of storing Ethereum’s entire history on their local drives. Verkle Trees emerged as the technological marvel enabling this accessibility, empowering users to engage with Ethereum effortlessly.

In the Purge phase, Ethereum underwent a transformational streamlining process. Technical complexity was significantly reduced, ushering in an era of efficiency. Disk space optimization became a priority across all Ethereum nodes, paving the way for a leaner, more agile blockchain network. Ethereum’s commitment to simplicity and resource optimization has solidified its position as a frontrunner in the blockchain world.

The Splurge marked the culmination of Ethereum’s evolution. A host of user-centric features was seamlessly integrated, enhancing the overall Ethereum experience. These enhancements addressed specific upgrade needs identified during previous phases. The result is a blockchain network that not only scales efficiently but also prioritises user satisfaction, making Ethereum a platform of choice for developers and users alike.

Ethereum Layer 2 Solutions

The blockchain addressed its scalability crisis with the implementation of Layer 2 solutions. 

Ethereum users once grappled with exorbitant gas fees, turning transactions into a costly endeavour. High gas fees led to users paying hundreds of dollars for a single network transaction. Events like the Otherdeeds land sale, with gas fees soaring to 8000 gwei, underscored Ethereum’s scaling predicament. Ethereum’s future depended on accommodating millions of users, increasing transaction throughput, and maintaining security and decentralisation.

Layer 2 solutions have emerged as the game-changer Ethereum needed. Unlike its previous monolithic approach, where all activities occurred on the blockchain, Layer 2 solutions adopted a modular strategy, delegating tasks to other network layers. Layer 2 now operates seamlessly on top of Ethereum, which remains a Layer 1 blockchain. These Layer 2 solutions have become the cornerstone of Ethereum’s scalability, preserving its security and decentralisation.

Layer 2 solutions on Ethereum
Numerous Layer 2 projects have materialised, each contributing unique enhancements to Ethereum’s scalability. Image Source: Cryptoticker

Layer 2 solutions execute transactions beyond the underlying network, compressing transaction data before returning it to Ethereum. Layer 2 handles transaction execution, while Layer 1 ensures security and data storage. Multiple Layer 2 solutions now run concurrently on Ethereum, significantly boosting transaction throughput. Ethereum’s reduced congestion and increased scalability, all while maintaining security and integrity, have become a reality.

Numerous Layer 2 projects have materialised, each contributing unique enhancements to Ethereum’s scalability. Standout solutions include Arbitrum, Optimism, zkSync, StarkNet, and Metis. These projects have successfully improved Ethereum’s scalability, enhancing user experiences and expanding the network’s capabilities.

Optimistic Rollups: A Trusted Framework

Optimistic Rollups, including projects like Optimism, Arbitrum, and Metis, have embraced a trust-based system where Layer 1 smart contracts no longer need to verify Layer 2 state changes. This innovation has led to instant fraud-proof verification. While Optimism and Arbitrum rely on Layer 1 execution, Metis brings a higher level of decentralisation, thanks to its Metis Virtual Machine (MVM).

ZK-Rollups: A Secure Reality

Zero-Knowledge Rollups (ZK-Rollups) solutions, such as zkSync and StarkNet, have not only compressed off-chain transactions but have also mandated cryptographic proofs for accuracy. Ethereum smart contracts now require “zero-knowledge cryptographic proofs” for each batch of transactions, guaranteeing data integrity.

Optimistic Rollups vs. ZK-Rollups

Optimistic Rollups, with their reduced disputes over transaction validity, have demonstrated faster withdrawal periods compared to ZK-Rollups. Their scalability benefits have become a tangible asset for Ethereum.

The User Favourite: Arbitrum

Among Layer 2 solutions, Arbitrum has emerged as a user favourite. With lower gas fees and an automatic Arbitrum Virtual Machine (AVM) to Ethereum Virtual Machine (EVM) translation, DApps have flocked to Arbitrum, making it the leading choice for Ethereum scaling.

Read: USDC Stablecoin by Circle Set to Embrace Ethereum Scaling Network Arbitrum

What’s Next for Ethereum?

top 10 blockchains ranked- Ethereum at Rank 1
Ethereum has achieved milestones that have reshaped the blockchain landscape. Image Source: Binance

Ethereum, the world’s second-largest blockchain, is not resting on its laurels. As it looks forward to a promising future, Ethereum enthusiasts can expect exciting developments, global events, and an ambitious upgrade known as “proto-danksharding” to take centre stage.

Ethereum’s vibrant community thrives on collaboration and innovation, and global events provide the perfect platform for Ethereum developers, market influencers, policymakers, and community members to come together and share their ideas.

Ethereum.org hosts meetup groups and organises global ETH hackathons, making it easy for Ethereum enthusiasts, often referred to as “Ethereans,” to connect with like-minded individuals. These events facilitate networking and collaboration, driving the Ethereum ecosystem forward.

Proto-Danksharding

EIP-4844, short for Ethereum Improvement Proposal 4844, is set to revolutionise the Ethereum network. By implementing “proto-dank sharding,” it promises to reduce transaction costs on layer twos significantly.

Sharding: The Need for Scalability

The concept of sharding in Ethereum has been in discussion since 2016 due to rising transaction fees and scalability concerns. Sharding is a method that involves splitting the network into smaller chains or “shards,” akin to adding lanes to a highway to accommodate more traffic. Ethereum, in its current state, stores and processes data inefficiently, causing high costs for users.

EIP-4844 introduces “proto-dank sharding” as a step towards sharding without implementing the entire sharding process. This clever solution aims to reduce layer 2 transaction fees significantly.

Blobs: A New Type of Persistent Memory

EIP-4844 introduces a new form of persistent memory called a “blob” to Ethereum. Unlike the current data storage, known as “call data,” blobs come with an expiration date and are automatically deleted. These blobs exist only on nodes in the consensus layer, not the execution layer. This means that smart contracts on Ethereum cannot directly access data within a blob.

To work with blobs, EIP-4844 introduces “blob carrying transactions.” These transactions have a hash of a KZG commitment attached, which identifies the blob. These transactions pass through Ethereum’s consensus just like normal transactions but signal to nodes that additional work with the attached blob is required.

To account for blob data storage costs, EIP-4844 introduces a new fee market alongside the existing one. This additional fee market adjusts gas prices to target a specific number of blobs per block, ensuring fair compensation for blob storage.

KZG commitments are used to identify blobs, but they require a “trusted setup ceremony.” This ceremony, open to the public, ensures the security of the commitments. One honest participant in the ceremony can hold the key to Ethereum’s security.

Once EIP-4844 is implemented, transaction fees on layer 2 networks will plummet, enabling a plethora of new applications in areas like blockchain gaming, social networks, and more economically disadvantaged regions. The reduction in fees by an order of magnitude will unlock Ethereum’s full potential.

ETH Price Predictions

Ethereum finds itself in a challenging range, marked by sideways movement since mid-August. This seven-week consolidation offers no clear impulsive action in any direction, making it difficult to predict price movement. One plausible interpretation is that we may be witnessing a tiny leading diagonal in wave one of wave three. However, this speculative assessment arises from the absence of decisive downward impulses, making it a bearish scenario.

When comparing Ethereum to Bitcoin, it becomes evident that Ether (ETH) currently appears more bearish. The critical level to watch is $1,726; a move above this point could change the larger assumption. Until then, the focus remains on further downward movement.

ETH(Ethereum) Price Chart- month
Ethereum is down 1.83% in the last 24 hours, trading at $1,596.13 USD. Image Source: TradingView

Several potential scenarios are on the table, each with varying levels of probability. A break above $1,661 could send Ethereum to $1,690, then $1,705, and eventually, a breach of $1,726 could shift the larger assumption. Conversely, a drop below $1,611 could confirm the downside momentum, with a target for the third wave around $1,450, in line with the 88.7% Fibonacci retracement level and the 1.618 extension level.

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