Ethereum’s Future Hinges on Three Major Transitions, Outlines Founder

In a recent blog post, Ethereum co-founder Vitalik Buterin discussed three crucial transitions that the Ethereum network needs to undergo in order to mature and effectively serve its users. These upcoming transitions are comprised of three core parts, Layer 2 (L2) scaling, wallet security, and privacy.

The blog was shared by Buterin on his official Twitter account:

L2 scaling involves moving everyone to rollups, which is essential to handle the high transaction costs on the Ethereum network. Without this transition, Buterin warned that products aiming for mass markets might abandon the blockchain and resort to centralized solutions.

The wallet security transition implies moving everyone to smart contract wallets. This is crucial as it impacts how users feel about storing their assets. Failure to achieve this transition could lead to more users gravitating towards centralized exchanges.

The privacy transition aims at ensuring privacy-preserving funds transfers and developing privacy-preserving features such as social recovery, identity, and reputation systems. Without this, users may move to centralized solutions which offer at least some form of data privacy.

Buterin highlighted that these transitions are challenging due to the significant coordination required. Furthermore, they would fundamentally change the way the community interacts with Ethereum and require significant modifications from applications and wallets.

In the L2 scaling world, a user would exist on several L2s, leading to the dissolution of the concept of one user having only one address. The transition to smart contract wallets complicates this further by making it harder to maintain the same address across L1 and various L2s. Privacy requirements would necessitate each user to have even more addresses, possibly one per transaction.

Addressing the complexity of these transitions, Buterin discussed potential solutions such as automated consolidation of funds and cross-L2 bridging systems for on-chain payments and identity. He also highlighted the challenges that transition, particularly privacy, poses for key recovery.

In the meantime, Ethereum developers have recently finalized the set of changes for the upcoming ‘DenCun’ upgrade. The upgrade, which is part of Ethereum’s continuous effort to improve its functionality and scalability, is tentatively scheduled to occur in July 2023.