Vitalik Buterin Continues on Ethereum’s Future: The Scourge

Vitalik Buterin and Ethereum are in the midst of continuing their roadmap. This roadmap has six sections. The Merge saw the change from PoW to PoS.

Currently, The Surge is about improving Ethereum’s scalability. See our recent article on The Surge. Next in line is The Scourge. This should improve censorship resistance, decentralization, and MEV risks for the protocol. So, in this article, we look at what Buterin has to say about The Scourge.

What Is The Scourge?

The Scourge deals with some specific issues that Ethereum faces. There are three issues that this part of the roadmap wants to tackle,

• Decentralization.
• MEV risks for the protocol.
• Censorship resistance.

To clarify, MEV is the maximal extractable value. In other words, the maximum profit that validators can extract from validating blocks. They can do this by rearranging or excluding transactions. This can have repercussions for all network users. For example, higher transaction fees or network congestion.

Staking and liquid staking can affect this as well. For instance, large stakers can influence block generation. By improving MEV in their blocks, they receive a higher revenue. It’s also easy for them to turn their staked capital into liquid staking. We get into more details about this in a moment. So, we look into three aspects of The Scourge. The picture below shows its roadmap.

Source: Vitalik Buterin’s website

Fixing the Block Construction Pipeline

The current Ethereum block construction happens in a specific way. Validators, that can propose a block, will auction this job off to so-called ‘builders’. Now, these builders try to maximize the profit they can get from a block. That’s the MEV, as earlier explained. They use specialized algorithms for this. The original validators are left with the ‘dumb-pipe’ task. This is listening to and accepting offers.

Proposers and Builders

There are a couple of variations available for this setup. The two most common variations are,

• Proposer-builder separation (PBS). Validators still propose blocks. However, they receive the payload from builders
• Attester-proposer separation (APS). The entire slot becomes the builder’s responsibility.

So, there’s a subtle difference between them. Nonetheless, by separating these powers, validators remain decentralized. On the other hand, the builders can become very centralized. That’s the trade-off and also a risk. The picture below shows the current Ethereum builders. 

As the picture shows, two builders are in control of 88% of choosing content for Ethereum blocks. They can decide to censor a transaction, however, that comes with restrictions. Well, they can’t reorg blocks. They would need 100% before they can do this. With 88% censoring, you need to wait 9 slots or 114 seconds instead of 6. For some transactions, it’s fine to wait. However, other transactions, like liquidations in DeFi, will experience market manipulation with delays. Another strategy can be a sandwich attack. 

Solutions are, for example, to break down the block production task further. For instance, the proposers have the task back to choosing transactions. The proposers are the stakers. On the other hand, builders can only choose the ordering. They can also insert some transactions of their own. So, this reduces their MEV influence. There are so-called inclusion lists to deal with this. Some proposals can help with this. For example, FOCIL + APS or BRAID. You can read about them here.

10/ Ultimately, the goal is simple but profound: decentralized block building without giving up performance.

As more proposals like FOCIL + APS and BRAID develop, Ethereum’s future looks more decentralized and secure than ever

— tcoratger (@tcoratger) October 20, 2024

Encrypted Mempools

Encrypted mempools are another technology. They can help to install the above-mentioned proposals, like BRAID or APS versions. It allows you to broadcast encrypted transactions. You will also need to provide a validity proof. Since you include blocks in an encrypted form, the block builder doesn’t know its content. It reveals these contents later. Hence, there are fewer options for MEV manipulation by builders.

The challenge here is to come up with a design that reveals the content at a later stage. There are currently two leading techniques for this.

• Threshold decryption.
• Delay encryption. This is closely related to verifiable delay functions (VDFs).

Fixing Staking Economics

Out of the current $ETH supply of 120 million, the stake rate is 30%. That’s around 34 million $ETH. This number is high enough to protect Ethereum from 51% attacks. However, researchers also warn for a higher percentage number of staked $ETH.

If we end up with a scenario that has almost all $ETH staked. In that case, we can see the following risks,

• The average staker would lose enthusiasm. They may look for the easiest option, which may involve choosing centralized validators.
• The slashing mechanism loses credibility.
• The bulk of the stake can be taken over by a single liquid staking token. 

There’s no need anymore for Ethereum to issue around 1 million $ETH per year.  A dominant single-liquid staking token could get its hand on this. The picture below shows the history of daily staked $ETH.

Source: Beacon chain 

There are ways to deal with this. For example, by capping staking penalties. For instance, by 1/8. However, this makes 7/8 of all staked $ETH unslashable. This means that you can put in the same liquid staking token.

Another option is two-tiered staking. However, you can also massively reduce issuance. An issue with these proposals is, that the issuance curve would need adjusting.

Application Layer Solutions

Besides being an L1, Ethereum is also an ecosystem. This asks for important application-layer strategies. These strategies should reduce the above-mentioned risks. For example,

• Specialized staking hardware solutions. — You can buy hardware that makes operating a staking node easy. 
• Squad staking — Obol offers a solution for various people to stake together. 
• Airdrops — For example, Starknet’s airdrop to solo stakers. 
• Decentralized block building marketplaces. 
• Application-layer MEV minimization.

Conclusion

Vitalik Buterin and his Ethereum team keep building the current roadmap. This involves six steps. We take a closer look at The Scourge. This step should reduce decentralization, MEV risks for the protocol, and censorship resistance.

The current $ETH price is $2,632.55 with a $318 billion market cap. There’s an infinite max supply. The total and circulating supply is 120 million $ETH.

Disclaimer

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