Ethereum 2.0 is being seen by the crypto community as a lifeline for a network that today suffers from transaction overcrowding and crushing fees. However, recent research produced by a group of computer scientists has shown that next year’s Ethereum consensus shift will not come without risks.
The study called ‘Three Attacks on Proof-of-Stake Ethereum’ was written by a group of six researchers from Stanford University (Joachim Neu, Ertem Nusret Tas and David Tse) and the Ethereum Foundation (Caspar Schwarz-Schilling, Bernabé Monnot and Aditya Asgaonkar), and tries to map the vulnerabilities that Ethereum will encounter in the future in its 2.0 version.
The research focuses on three different ways that the consensus-based proof of participation (PoS) network can be attacked. The first two weaknesses had already been identified in the past and would allow malicious agents to carry out a block reorganization attack and cause delays in consensus.
The group’s new study, however, found a third type of attack that would be a sort of combination of the two threats already identified.
The Threats of Ethereum 2.0
The first type of attack concerns a possible short-scale reorganization of the consensus chain. The loophole could be exploited by an individual validator who wanted to increase their profit by delaying consensus decisions and thereby manipulating the blockchain in their favor.
This could be done by an attacker with enough resources to produce blocks faster than the original chain. By traversing the network, the validator could insert fraudulent blocks and perform a double-spend attack.
In the second threat, network delay could be used to paralyze consensus decisions indefinitely. This attack, however, would depend on an ideal blockchain scenario to execute and its advancement could be prevented by only 15% of the validators in the network.
“We provide refined variants of these attacks, considerably relaxing the adversary stake and network time requirements and thus making the attacks more severe,” says the study.
The latest threat discovered by the researchers combines the loopholes of the two previous vulnerabilities, resulting in a third attack that is even more serious. In this scenario, an attacker could, with a small fraction of ether in stake and no control over the propagation of network messages, cause large-scale rearrangements in the consensus chain.
“Honest-but-rational or ideologically motivated validators could use this attack to increase their profits or paralyze the protocol, threatening the alignment of incentives and the safety of Ethereum based on proof of participation,” warns the study.
While the study describes in detail the threats that Ethereum 2.0 could face in the future, it also proposes solutions that are likely to be taken into consideration by Ethereum developers, as half of the researchers have ties to the project.
Vitalik’s Buterin’s Endgame: Ethereum 2.0 and Centralization Predicament
A year after the start of the Ethereum 2.0 launch process, Vitalik Buterin has outlined a “plausible roadmap” for the blockchain.
Titled “Endgame,” the co-founder of Ethereum, Vitalik Buterin, has put forward a hypothetical idea of a “big blockchain” that is trustless and censorship-resistant but indefinitely accompanies some of the common trade-offs such as scalability and centralization when it comes to block production.
To achieve a system in which the block production is still centralized but the block validation is trustless and highly decentralized in nature, there need to be certain updates in place.
Buterin listed down a series of implementations, including the addition of the second tier of staking, the introduction of fraud proofs/ZK-SNARKS, data availability, and secondary channels for transactions. A system with all the aforementioned solutions would provide basic infrastructure, but the exec believes it would still be “somewhat aesthetically ugly.”
In fact, rollup implementations, such as Arbitrum, Optimism, Zksync, StarkNet, would also result in a similar outcome of centralized block production. Buterin stated that single rollups will be unsuccessful in holding almost more than half of Ethereum’s activity and would max out at a few hundred transactions per second instead.
Even though a multi-rollup future for Ethereum would present decentralized validation, robust censorship resistance, and even distributed block production, there is one catch. The exec asserted that the decentralization of block production may not last very long and cited the possibility of cross-domain MEV.
“There are several benefits to being able to construct the next block on many domains at the same time: you can create blocks that use arbitrage opportunities that rely on making transactions in two rollups, or one rollup and the main chain, or even more complex combinations.”
In a nutshell
In a multi-domain world, Buterin claimed that there are “strong pressures toward the same people controlling block production on all domains.” While a situation such as this is hypothetical, it is not entirely impossible. In short, centralization is one factor that continues to emerge irrespective of the route a blockchain plans on following.
This is where protocol-level mechanisms that include committee validation, data availability sampling, and bypass channels to “regulate” the market come. These techniques would ensure that the power is not abused by any players.
Regarding Ethereum, the co-founder believes that the “profound benefit” of the network’s rollup-centric roadmap implies that it is “open to all of the futures.” Furthermore, the blockchain does not need to “commit to an opinion.”
On a note to ETH researchers, Buterin pointed that it is important to have a clear understanding of what levels of decentralization in block production are achievable. He concluded by saying that the implementation of complicated plumbing may not render advantageous if cross-domain MEV makes it unsustainable.
On the first anniversary, the Ethereum 2.0 Beacon Chain solidifies the proof of interest change
The Ethereum community is celebrating the first anniversary of the Ethereum 2.0 Beacon Chain, which set the network’s roadmap towards Eth2 with its launch on December 1, 2020.
According to data aggregator Staking Rewards, Ethereum 2.0 is now the second largest capitalization betting proof network with $38.4 billion in stakes.
While Solana currently leads with nearly $88.2 billion, 77.4% of SOL’s supply is locked in bets compared to just 7.10% for Ether. Many analysts believe it’s only a matter of time before Ethereum rises to the top. Ethereum’s next chain fusion is expected to increase betting rewards by several multiples.
The path to Eth2
Since launching the Beacon Chain last year, Ethereum has completed several major updates to its Eth2 roadmap and changed its evidence of participation consensus.
In April, Ethereum’s Berlin hard fork was successfully executed, raising prices to what was then a record above $2,200. The Berlin Update covered four Ethereum Improvement Proposals (EIPs), including measures to reduce costs associated with specific transactions, simplify processing and group multiple transactions into a single transfer, and increase expenses associated with the Denial-Of-Service (DoS) launch ) attacks.
Although Berlin was seen as having little impact for the typical Ethereum end-user, the update paved the way for the next Ethereum update, London
The London updates went live in August, releasing five EIPs designed to reform the Ethereum rate market.
The most notable EIP contained in London was 1559, which introduced a base rate that is burnt along with a tip to miners for every transaction performed on the Ethereum. According to Ultrasound Money, nearly 1,088M Ether (almost $5B at current prices) has been destroyed since 1559 went into operation, creating significant deflationary pressure on Ethereum supplies.
London also contained EIPs designed to reduce Ethereum gas price volatility.
The latest Ethereum update, Altair, went live in late October, pushing prices to new highs above $4,400.
Unlike Berlin and London, Altair’s updates were made to the Ethereum 2.0 Beacon chain, introducing the first changes since it went live in December 2020.
In an interview with CNBC, Ethereum developer Tim Beiko described Altair as testing whether the Beacon chain “works correctly” and paving the way for its next chain merge with the existing Ethereum network.
“This shows that we are able to update the PoS engine, and that’s a pre-condition for next year’s migration,” he said. “That means there’s a slightly greater chance that things are going well for the transition. [Eth2] in the next year.”
Altair has also enabled support for validators that use “light clients,” including the operation of low-powered devices such as cell phones, in a proposal to allow for broader participation and increased slashing penalties for validators that misbehave or fall apart. offline.
Looking to the future, the Ethereum community is looking forward to merging the existing network with the beacon network.
The merger will abandon the Proof of Participation consensus, transferring all transaction validation to the beacon chain and stakers. With the merger set to end the Ethereum bloc’s rewards and reduce emissions overall, many analysts are predicting that even greater deflationary pressure will be placed on the Ether markets.
While no firm date is set for the merger, Beiko recently estimated that the update could ship during the second quarter of 2022.
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Developer shares insights on ETH 2.0 and why he’s ‘feeling good about Ethereum right now’
Ethereum’s market cap dropped below $500 billion at press time. Needless to say that Ethereum’s short-term weakness doesn’t really bother its long-term investors as it still holds over $166 billion in TVL.
Well, the network is gearing up for ETH 2.0, its biggest upgrade since 2015. As per developer Tim Beiko, both ETH 1.0 and ETH 2.0 teams worked together in October on the prototypes for the transition. With most “specifications in place,” Beiko explained what’s coming next in an interview. He said,
“What we’re doing during November is we’re trying to have these very short-lived test nets.”
But, even before that, ETH 2.0 deposit contract has topped the staked value of 100,000 ETH.
With the confidence in the market, Beiko also hoped that they have something substantial before the December holidays. What Beiko was referring to is the Arrow Glacier upgrade that is projected to take place on 8 December 2021.
The developer commented that the Ethereum community is interacting to understand the changes that are to come. With that, the milestone of the ‘Merge’ is closer than ever. But, when is it scheduled for? Beiko answered,
“Next year, for sure.”
Also, Beiko added that if the codes are done by February, the Merge should commence somewhere in April or May. He also said,
“It’s hard to give it a specific date just yet because if we find a major bug or something that takes us three weeks to fix you know, that delays things by three weeks.”
Nonetheless, the chair of all core devs at the Ethereum Foundation is looking quite optimistic, as he mentioned,
“I’m feeling pretty good about Ethereum right now”
Ethereum looks messy because all the "prototypes" are public. Easy with hindsight to "know" this would work, but a lot of things look as uncertain today as rollups did a few years ago! https://t.co/25AWQw59h5— Tim Beiko | timbeiko.eth 🍵 (@TimBeiko) November 15, 2021
100 days of EIP-1559
With ETH 2.0 in focus, EIP-1559, which took place on 5 August this year, deserves a mention as well. According to Christine Kim, a Research Associate at Galaxy Digital, “EIP1559 has saved users a total of $844 million in transaction fees through base fee refunds” since its activation.
The improvement proposal is considered a milestone as it is set to begin a deflationary trend on Ethereum. Kim added,
“56% of new coins issued on #Ethereum has been offset by the amount of $ETH burned through base fees.”
However, there are still some shortcomings in the existing network. The researcher noted that the “average cost of sending a transaction on Ethereum has continued to climb.” While it has not decreased miner revenue, high fees remain a problem for Ethereum, according to Kim.
” Despite lower earnings from transaction fees, total miner revenue in dollar terms has increased 33%.
In this context, Beiko agreed about the fees,
“I think we’re on the right path… If I could accelerate something it would be better tooling and migrations around layer 2. I think the fees on Ethereum are quite high right now. “
Having said that, Real Vision founder and investor Raoul Pal is seeing an Ethereum spike as much as 300% by December-end. He predicted,
“Now, I don’t expect perfection but with all the other analysis I have done, something like a 100% to 300% rally is highly probable into year end.”