Advancements in Ethereum’s Scalability: A Comprehensive Analysis of Network Upgrades and Their Impact on Performance and Utility

June 30, 2025 Research Reports 0

Research Report: Ethereum’s Transformative Upgrades – A Deep Dive into Scalability, Efficiency, and User Experience

Many thanks to our sponsor Panxora who helped us prepare this research report.

Abstract

Ethereum, a trailblazer in blockchain technology, has consistently pushed the boundaries of decentralized applications and smart contracts since its inception. However, its phenomenal growth has simultaneously exposed fundamental challenges, primarily related to network scalability, transaction throughput, and cost efficiency. In response, the Ethereum community has embarked on an ambitious and multi-faceted roadmap of network upgrades, meticulously designed to address these limitations while upholding the network’s core tenets of decentralization and security. This comprehensive research report offers an in-depth examination of pivotal technical advancements shaping Ethereum’s future. It meticulously dissects the mechanics and implications of EIP-4844 (Proto-Danksharding), particularly focusing on the introduction of ‘blobs’ and their profound impact on Layer 2 transaction costs. Furthermore, the report explores the overarching vision of ‘full sharding,’ a long-term scalability solution, and delves into other critical roadmap items such as ‘statelessness’ and ‘account abstraction.’ By scrutinizing the intricate technical underpinnings and anticipated outcomes of these developments, this analysis elucidates how these synergistic technological shifts are meticulously engineered to dramatically enhance Ethereum’s performance, expand its utility, and fortify its competitive standing in the dynamic and rapidly evolving global blockchain ecosystem.

Many thanks to our sponsor Panxora who helped us prepare this research report.

1. Introduction

Ethereum emerged in 2015 as a groundbreaking distributed computing platform, transcending the capabilities of prior blockchains by introducing Turing-complete smart contracts. This innovation paved the way for a vast array of decentralized applications (dApps), decentralized finance (DeFi) protocols, non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs), effectively ushering in the era of the ‘world computer.’ Conceived by Vitalik Buterin, Ethereum’s vision was to create a robust, censorship-resistant, and programmable blockchain capable of supporting complex logical operations, moving beyond simple value transfers to facilitate a global, trustless computing paradigm. (ethereum.org)

Despite its revolutionary impact and widespread adoption, Ethereum’s foundational architecture, particularly its original Proof-of-Work (PoW) consensus mechanism and monolithic design, presented inherent limitations in terms of scalability and transaction throughput. As network demand surged, particularly during periods of intense activity such as the 2017 Initial Coin Offering (ICO) boom, the emergence of popular dApps like CryptoKitties in 2017, the DeFi Summer of 2020, and the NFT explosion of 2021, the network frequently experienced severe congestion and exorbitant transaction fees. These constraints highlighted a fundamental challenge often referred to as the ‘Blockchain Trilemma’ – the inherent difficulty in simultaneously achieving decentralization, security, and scalability. While Ethereum has historically prioritized decentralization and security, scalability has been the primary bottleneck. (ethereum.org)

Recognizing these critical challenges, the Ethereum community, guided by the Ethereum Foundation and numerous independent researchers and developers, initiated a comprehensive and iterative series of network upgrades. This report aims to provide an exhaustive analysis of these pivotal upgrades, delving into their technical intricacies, their anticipated synergistic effects, and their overarching impact on Ethereum’s trajectory towards becoming a more efficient, accessible, and high-performance blockchain platform.

Many thanks to our sponsor Panxora who helped us prepare this research report.

2. Historical Challenges in Ethereum’s Scalability

Ethereum’s early architecture, while innovative, was inherently designed for a certain level of throughput that proved insufficient for global-scale adoption. The scalability challenges stemmed primarily from its monolithic structure and its initial Proof-of-Work (PoW) consensus mechanism, Ethash.

2.1 Limitations of Proof-of-Work and Monolithic Architecture

Under the PoW paradigm, every node in the Ethereum network was required to process and validate every single transaction and smart contract execution. This design choice, while paramount for ensuring robust security and decentralization, created a significant bottleneck. The network’s throughput was limited by a fixed block time (approximately 13-15 seconds) and a fluctuating but bounded ‘gas limit’ per block. Each operation on Ethereum consumes a certain amount of ‘gas,’ a unit of computational effort. Transaction fees are determined by the gas consumed multiplied by the ‘gas price,’ which users bid to have their transactions included in a block.

During periods of high network demand, the competition for limited block space intensified. Users, eager for their transactions to be processed quickly, would offer higher gas prices. This competitive bidding led to a volatile and often prohibitively expensive fee market, colloquially known as ‘gas wars.’ For instance, during the CryptoKitties phenomenon in late 2017, network congestion was so severe that gas prices surged, making even simple transactions costly and slow. Similarly, the DeFi boom and NFT mints frequently drove gas prices to hundreds of Gwei (billions of Wei, the smallest unit of Ether), rendering the network inaccessible for many potential users and hindering the adoption of promising dApps. (coindesk.com)

The monolithic nature meant that the entire network state – including all account balances, contract code, and storage – had to be stored and processed by every full node. As the network grew, the cumulative size of this state expanded rapidly, increasing the hardware requirements for running a full node. This trend, if unchecked, could lead to centralization, as fewer entities would possess the resources to participate fully in network validation and maintenance. The combination of limited transaction throughput, high and volatile fees, and increasing state size collectively highlighted an urgent need for architectural improvements to ensure Ethereum’s long-term viability and broader utility.

2.2 The Evolution to Ethereum 2.0 (Serenity) and the Modular Roadmap

Recognizing these foundational challenges, the Ethereum community initiated the ambitious ‘Ethereum 2.0’ project, later rebranded as ‘Serenity’ and now simply known as Ethereum’s roadmap, emphasizing a continuous evolution rather than a distinct version. The core vision was to transition from a monolithic PoW blockchain to a modular Proof-of-Stake (PoS) architecture, incorporating sharding and other advanced features. (ethereum.org)

This roadmap is generally segmented into several phases:

  • The Merge (Execution Layer & Consensus Layer): The successful transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) in September 2022. This merged the original Ethereum execution layer (Eth1) with the Beacon Chain (Eth2’s PoS consensus layer), eliminating energy-intensive mining and laying the groundwork for future scalability upgrades. This upgrade did not directly improve throughput but changed the consensus mechanism and enabled future scaling. (ethereum.org)
  • The Surge (Sharding): Focuses on horizontal scaling through sharding, significantly increasing data availability and network throughput for Layer 2 (L2) solutions. EIP-4844 is the first step in this phase.
  • The Scourge (MEV & Censorship Resistance): Addresses Maximal Extractable Value (MEV) and improves censorship resistance through mechanisms like Proposer-Builder Separation (PBS).
  • The Verge (Statelessness): Introduces Verkle trees and state expiry to make nodes ‘stateless’ or ‘less stateful,’ reducing storage burden and enabling faster node synchronization.
  • The Purge (Historical Data Pruning): Aims to simplify the protocol and reduce the amount of historical data nodes need to store.
  • The Splurge (Miscellaneous Improvements): Encompasses all other crucial, smaller improvements that enhance the network’s overall functionality and user experience.

Each phase is interdependent, building upon the foundations laid by the preceding ones. The current focus heavily lies on ‘The Surge,’ with EIP-4844 serving as its initial and most impactful component.

Many thanks to our sponsor Panxora who helped us prepare this research report.

3. EIP-4844: Proto-Danksharding (The Dencun Upgrade)

3.1 Overview of EIP-4844

EIP-4844, formally known as ‘Proto-Danksharding’ and implemented as part of the ‘Dencun’ network upgrade in March 2024, represents a monumental leap forward in Ethereum’s scalability journey. It is not ‘full sharding’ in its ultimate form, but rather a crucial precursor, specifically designed to address the high cost of data availability for Layer 2 (L2) rollup solutions. Before EIP-4844, L2s relied on Ethereum’s calldata to publish transaction data to the mainnet. While calldata is efficient for general-purpose data, it is permanently stored on-chain as part of the execution layer’s history and processed by the Ethereum Virtual Machine (EVM), making it expensive and inefficient for the large volumes of data generated by rollups. (eips.ethereum.org/EIPS/eip-4844)

Proto-Danksharding introduces a new, dedicated, and significantly cheaper method for L2s to post transaction data to the Ethereum network through the use of ‘blobs’ (Binary Large Objects). These blobs are temporary data containers that are attached to blocks but are stored separately from the main execution chain and are not processed by the EVM. Their temporary nature (approximately 18 days) is key to their cost-effectiveness, as rollups only require this data for a limited window to prove the validity of their transactions or to allow users to exit the L2 in case of a dispute.

The primary objective of EIP-4844 is to dramatically reduce the operational costs for rollups. By providing a more efficient data availability layer, it lowers the transaction fees for end-users on L2s, thereby making Ethereum-based applications more accessible and fostering broader adoption. It serves as a foundational step towards ‘full danksharding,’ a future state where data availability will be horizontally scaled across numerous dedicated ‘data shards.’

3.2 Technical Implementation: Blobs and KZG Commitments

EIP-4844 introduces several fundamental changes to Ethereum’s block structure and transaction processing:

  • New Transaction Type (BlobTx): A new type of transaction, designated as BlobTx, is introduced. This transaction includes standard execution data (similar to a regular transaction) but also references one or more ‘blobs’ of data. These blobs are effectively large arrays of bytes, each capable of holding up to 128 KB of data. A single BlobTx can currently attach up to six blobs, meaning a single block can carry up to 0.75 MB of blob data in addition to its regular execution data. (blocknative.com)

  • Ephemeral Storage on the Consensus Layer: Unlike calldata, which is stored indefinitely on the execution layer, blobs are stored ephemerally on the consensus layer (the Beacon Chain). This temporary storage mechanism is crucial for cost efficiency. The data is pruned after approximately 4096 epochs, which translates to roughly 18 days. This timeframe is sufficient for optimistic rollups to post their fraud proofs and for users to initiate withdrawals, while zero-knowledge (ZK) rollups, which rely on cryptographic validity proofs, generally require even less time as their data is primarily for user-side verification.

  • KZG Commitments for Data Availability: To ensure the data within blobs is genuinely available to the network, EIP-4844 utilizes Kate-Zaverucha-Goldberg (KZG) polynomial commitments. Instead of requiring every full node to download and store all blob data, only a small, fixed-size ‘commitment’ to the blob data is included in the block header. Full nodes only need to verify this commitment. Critically, light clients can use Data Availability Sampling (DAS) techniques with these KZG commitments to verify that the blob data was indeed published and is available, without downloading the entire blob. This mechanism is paramount for the scalability of future full sharding, where nodes will only sample small portions of data from many shards. The security of KZG commitments relies on a trusted setup ceremony (the ‘KZG ceremony’), which generates cryptographic parameters essential for verifying the commitments. (eips.ethereum.org/EIPS/eip-4844#kzg-trusted-setup)

  • Independent Blob Fee Market (EIP-1559 for Blobs): EIP-4844 introduces a separate, EIP-1559-like fee market specifically for blob data. This means that blob gas prices operate independently of the execution layer’s gas prices. A new BLOB_BASE_FEE parameter adjusts dynamically based on the demand for blob space, similar to how BASE_FEE adjusts for execution gas. The target for blob consumption is set at 3 blobs per block (0.375 MB), with a maximum of 6 blobs (0.75 MB). If demand exceeds the target, BLOB_BASE_FEE increases, making blobs more expensive and disincentivizing excessive usage. Conversely, if demand falls, the fee decreases. This dual fee market ensures that fluctuations in blob demand do not disproportionately impact the cost of regular EVM transactions, and vice-versa. (blocknative.com)

3.3 Impact on Layer 2 Solutions

The introduction of blobs through EIP-4844 has a transformative impact on Layer 2 (L2) scaling solutions, particularly rollups (both optimistic and ZK-rollups). Rollups function by executing transactions off-chain and then ‘rolling up’ batches of these transactions into a single compressed transaction posted to the Ethereum mainnet. A critical component of their security model is ‘data availability’ – ensuring that the raw transaction data is published on the L1 so that anyone can reconstruct the L2 state, verify computations, and challenge fraudulent activities (in optimistic rollups) or verify validity proofs (in ZK-rollups).

  • Dramatic Cost Reduction: Prior to EIP-4844, L2s posted this critical transaction data using calldata, which was subject to the general Ethereum execution gas fees. Calldata costs were often the single largest component of rollup transaction fees. With the advent of blobs, L2s can now post their data to the separate, cheaper blob market. Initial observations post-Dencun upgrade show a reduction in data posting costs by factors ranging from 10x to over 100x, depending on network congestion and specific rollup implementation. This directly translates to significantly lower transaction fees for end-users on L2s like Arbitrum, Optimism, zkSync, and StarkNet. (arxiv.org/abs/2405.03183)

  • Increased Throughput Capacity: By making data availability substantially cheaper, EIP-4844 indirectly increases the effective throughput of L2s. Rollups can now include more transactions per batch for the same or lower cost, or they can simply offer much cheaper transactions for their existing volume. This expansion of L2 capacity allows them to onboard more users and support a wider range of applications that were previously unfeasible due to high transaction costs, such as micro-transactions, high-frequency gaming interactions, or extensive on-chain social activities.

  • Enhanced Decentralization and Competition: Lower operational costs for rollups can encourage the proliferation of new L2s and specialized application-specific rollups (app-chains). This fosters a more competitive and innovative L2 ecosystem, benefiting users through diverse choices and potentially even lower fees. It also reinforces Ethereum’s ‘rollup-centric roadmap,’ where L1 serves as the secure settlement and data availability layer, while L2s handle the bulk of transaction execution.

  • Foundation for Full Sharding: Proto-Danksharding is not just about immediate cost savings; it’s a vital stepping stone. The introduction of blobs, KZG commitments, and Data Availability Sampling provides the core infrastructure and operational experience required for the eventual implementation of ‘full sharding.’ It validates the design principles and allows the Ethereum core developers to refine the technology incrementally, rather than attempting a monolithic shift to full sharding all at once. Initial observations of the blob fee market post-Dencun indicate that the market is still maturing, with periods of high demand pushing blob prices up, but generally remaining significantly cheaper than calldata. (arxiv.org/abs/2502.12966)

Many thanks to our sponsor Panxora who helped us prepare this research report.

4. Full Sharding: The Future Vision (The Surge)

4.1 Concept of Full Sharding

While EIP-4844 offers substantial, immediate improvements to data availability for Layer 2s, ‘full sharding’ represents the ultimate vision for horizontal scalability on Ethereum. Unlike Proto-Danksharding, which introduces temporary data blobs within the existing block structure, full sharding involves partitioning the Ethereum network’s data and processing load across multiple independent chains, known as ‘shards.’ This approach aims to distribute the computational and storage burden across the network, allowing transactions to be processed in parallel across different shards, thereby dramatically increasing the network’s overall throughput capacity.

The original concept of sharding for Ethereum envisioned ‘execution shards,’ where each shard would process its own set of transactions and smart contracts. However, with the evolution of the ‘rollup-centric roadmap,’ the focus has shifted. The current vision for full sharding is primarily centered around ‘data shards.’ In this revised model, the Ethereum mainnet (now the execution layer) and its L2s handle transaction execution. The shards, managed by the Beacon Chain, primarily serve as highly scalable, low-cost data availability layers, allowing L2s to post even larger quantities of compressed transaction data more efficiently than is possible even with Proto-Danksharding’s blobs. (ethereum.org

In this model, the Beacon Chain, which coordinates the entire Proof-of-Stake network, will play a central role. It will be responsible for selecting validators for each shard, ensuring cross-shard finality, and maintaining overall network integrity. This horizontal scaling contrasts with vertical scaling (e.g., faster processors), by adding more parallel processing units to handle a greater volume of data concurrently.

4.2 Technical Challenges and Considerations

Implementing full sharding, even in its data-centric form, presents an array of complex technical challenges, necessitating meticulous research and innovative solutions to ensure the network’s security, decentralization, and performance:

  • Data Availability Sampling (DAS): This is perhaps the most critical component. As full nodes will not download all data from all shards, DAS allows light clients and even full nodes to verify that shard data is available by randomly sampling small portions of it across the network. KZG commitments, introduced in EIP-4844, are fundamental to making DAS feasible. If DAS cannot be reliably implemented, the security of sharded data becomes questionable, undermining the entire sharding premise. (vitalik.ca/general/2021/04/07/sharding.html)

  • Cross-Shard Communication (Asynchronous Messaging): While the current sharding vision focuses on data availability for L2s, there will still be a need for efficient and secure communication between different shards or between L2s that might operate across different data shards. This will likely involve asynchronous message passing, where a transaction on one shard generates a ‘receipt’ that can be read by another shard. Ensuring atomic cross-shard transactions is incredibly complex and may not be a near-term goal, with L2s expected to handle most multi-chain interactions.

  • Security and Consensus Across Shards: A major concern is ensuring that a shard cannot be compromised by a small number of malicious actors. This is addressed by randomly assigning validators to shards for each epoch (or even within an epoch) by the Beacon Chain. This ‘random sampling’ makes it statistically improbable for a single attacker to control enough validators on a specific shard to corrupt it. Single Secret Leader Election (SSLE), a mechanism that hides the identity of the next block proposer until the last moment, further enhances security against targeted attacks. The Beacon Chain acts as the ultimate root of trust, coordinating the sharded system and enforcing finality across all shards. (vitalik.ca/general/2022/01/26/routing.html)

  • State Management and Read/Write Operations: Even with data shards primarily serving L2s, managing the global state across a sharded environment is complex. The goal is to move towards a more stateless design (discussed below), where nodes don’t need to store the entire history, but rather verify state changes via proofs. This reduces the burden on individual nodes. The transition from monolithic block processing to parallel sharded processing necessitates careful design to prevent issues like ‘data unavailability attacks’ and ‘state synchronization problems.’

  • Economic Model and Incentives: The incentive structure for validators participating in a sharded network must be carefully designed to ensure participation in data availability sampling and honest block production across diverse shards. The economic security model must scale with the number of shards.

Full sharding represents the pinnacle of Ethereum’s scalability roadmap, designed to provide immense data bandwidth for an ecosystem of thriving L2s. Its successful implementation will solidify Ethereum’s position as a robust, high-throughput, and decentralized global settlement layer.

Many thanks to our sponsor Panxora who helped us prepare this research report.

5. Statelessness and Account Abstraction (The Verge & The Purge)

Beyond sharding, Ethereum’s roadmap includes other critical upgrades that significantly enhance efficiency, security, and user experience. These include the pursuit of ‘statelessness’ and the implementation of ‘account abstraction.’

5.1 Statelessness (The Verge & The Purge)

‘Statelessness’ refers to a future state where Ethereum nodes do not need to store the entire, ever-growing historical state of the network. Currently, to validate new blocks, a full node must have access to the complete, current state of the blockchain, which includes all account balances, contract storage, and contract code. This state, currently organized in a Merkle Patricia Trie, is continuously expanding, leading to a phenomenon known as ‘state bloat.’ State bloat makes it increasingly challenging and resource-intensive for new nodes to sync and for existing nodes to maintain the network, potentially leading to centralization over time.

  • The Problem of State Growth: Every transaction modifies the state, and this data accumulates indefinitely. As the state grows, it requires more disk space, memory, and CPU cycles for lookup and verification. This escalating hardware requirement could reduce the number of participants capable of running full nodes, thereby diminishing the network’s decentralization.

  • Verkle Trees (EIP-4444): The core technological innovation enabling statelessness is the adoption of ‘Verkle trees’ to replace the current Merkle Patricia Tries for state representation. Verkle trees are a cryptographic data structure that offers significantly smaller proof sizes compared to Merkle Patricia Tries. This means that a node, instead of storing the entire state, can request and receive a compact ‘witness’ or ‘proof’ for any piece of state data it needs to verify a transaction or block. These proofs are much smaller and faster to verify. (vitalik.ca/general/2021/06/18/verkle.html)

  • Impact of Verkle Trees and Statelessness:

    • Reduced Storage Requirements: Full nodes will no longer need to store the entire state, significantly reducing their disk space footprint.
    • Faster Node Synchronization: New nodes can sync much more quickly by only downloading the latest state root and then requesting proofs for the data they need, rather than processing the entire blockchain history.
    • Enhanced Decentralization: Lower hardware requirements make it easier for individuals to run full nodes, fostering a more decentralized network of validators and participants.
    • Improved Light Client Capabilities: Light clients, which currently rely on trusted full nodes, will be able to verify transaction inclusion and state changes with much higher security by requesting and verifying compact Verkle proofs, without needing to download large amounts of data.
    • State Expiry (‘The Purge’): Once Verkle trees are fully implemented, it opens the door for ‘state expiry.’ This concept involves periodically ‘purging’ or archiving old, rarely accessed state data from the active state, further reducing the working set size for nodes. This would dramatically simplify the protocol and reduce the burden of storing historical data, ensuring that the network remains performant and accessible for node operators indefinitely.

5.2 Account Abstraction (EIP-4337)

‘Account Abstraction’ (AA) is a pivotal upgrade aimed at making Ethereum accounts more flexible, programmable, and user-friendly. In Ethereum’s current design, there are two primary account types: Externally Owned Accounts (EOAs), controlled by a private key and used by most users, and Contract Accounts, controlled by their code. EOAs are simple but rigid; they can only initiate transactions that follow a strict format (sender, nonce, gas price, gas limit, value, data, and signature). This rigidity limits user experience and security features common in Web2 applications.

  • The EOA Limitation: EOAs are inherently limited. They require a single private key for control, making them vulnerable to single points of failure (lost keys, stolen keys). They also impose a fixed transaction fee payment mechanism (ETH for gas) and lack advanced functionalities like multi-factor authentication, programmable spending limits, or social recovery without relying on complex, separate smart contracts that are not natively integrated with the account model.

  • EIP-4337: Decentralized Account Abstraction: EIP-4337, proposed by Vitalik Buterin and others, is a significant step towards achieving account abstraction without requiring a consensus-layer protocol change. It introduces a pseudo-transaction object called UserOperation that mimics the structure of a regular transaction but is handled by smart contracts rather than the Ethereum protocol itself. (eips.ethereum.org/EIPS/eip-4337)

    • UserOperation (UserOp): This new object contains information about the operation a user wants to perform, including the sender’s address, call data, gas limits, and a custom signature. Crucially, the UserOp can specify how gas should be paid, enabling gas abstraction.

    • Bundlers: Instead of being directly included in blocks, UserOps are sent to a separate mempool. Specialized nodes called ‘Bundlers’ monitor this mempool, aggregate multiple UserOps into a single, standard EOA transaction, and send this bundled transaction to be included in an Ethereum block. Bundlers are incentivized by the transaction fees contained within the UserOps.

    • Entry Point Contract: All bundled UserOps are sent to a single, canonical ‘Entry Point’ smart contract. This contract is responsible for validating the UserOps (checking signatures, nonces, and gas payments) and then executing them. The Entry Point contract acts as a central hub for all account-abstracted operations.

    • Paymasters: A groundbreaking feature enabled by EIP-4337 is the ‘Paymaster’ contract. Paymasters are smart contracts that can pay for a user’s gas fees. This enables several innovative scenarios:

      • Gas Abstraction: Users can pay for gas in ERC-20 tokens or have dApps sponsor their transaction fees, removing the need for users to hold native ETH for gas.
      • Sponsored Transactions: Projects or services can cover the transaction costs for their users, akin to freemium models in Web2.
      • Bundled Transactions: Users can approve multiple operations in a single signature, reducing the number of on-chain interactions.

  • Benefits of Account Abstraction:

    • Improved User Experience: Account abstraction can revolutionize how users interact with Ethereum. It enables:
      • Social Recovery Wallets: Users can designate trusted friends or institutions to help them recover access to their wallet if they lose their private key, eliminating the seed phrase problem.
      • Multi-Factor Authentication: Implement 2FA, biometric authentication, or hardware wallet requirements directly into the account logic.
      • Programmable Spending Limits: Set daily spending limits or whitelist approved addresses for specific dApps.
      • Session Keys: Temporary keys with limited permissions for specific dApps, improving security for gaming or high-frequency interactions.
      • Batch Transactions: Execute multiple logical operations (e.g., approve token, swap token, stake token) in a single on-chain transaction.
    • Enhanced Security: Allows for custom signature schemes, including quantum-resistant signatures in the future, and multi-signature capabilities directly at the account level, offering robust security beyond a single private key.
    • Innovation in Wallet Design: Transforms wallets from mere key managers into programmable smart accounts, blurring the lines between EOAs and contract accounts and fostering a new generation of highly functional and user-friendly wallets.

  • Challenges: While immensely beneficial, AA introduces new security considerations for smart contract wallets. Auditing smart contract wallets becomes paramount, and users must trust the code governing their funds. The complexity for developers building these new wallet types is also higher initially. (arxiv.org/abs/2309.00448)

Many thanks to our sponsor Panxora who helped us prepare this research report.

6. Other Roadmap Items & Synergistic Effects

The Ethereum roadmap is a continuous process of refinement and improvement. Beyond the major items discussed, several other initiatives are underway that contribute to the network’s overall health, decentralization, and future capabilities.

6.1 Proposer-Builder Separation (PBS) (The Scourge)

Proposer-Builder Separation (PBS) is a critical protocol change aimed at mitigating the centralization risks associated with Maximal Extractable Value (MEV). MEV refers to the profit validators (or miners in PoW) can extract by arbitrarily including, excluding, or reordering transactions within a block. In a PoS system, validators have significant power over transaction ordering.

  • The MEV Problem: Unchecked MEV can lead to concerns about transaction censorship, unfair practices (e.g., front-running), and a potential centralization of block production if only a few large entities can efficiently extract MEV.

  • How PBS Works: PBS separates the role of ‘block proposers’ (randomly selected validators who propose a block) from ‘block builders’ (specialized entities that construct blocks by optimizing transaction ordering for MEV and sending them to proposers). Builders bid for the right to have their block included by the proposer. This creates a competitive market for block production, making MEV extraction more transparent and potentially distributing its benefits more widely. (ethereum.org

  • Impact: PBS aims to improve network decentralization by reducing the economic advantage of large staking pools that can run sophisticated MEV extraction strategies in-house. It also enhances censorship resistance by making it harder for a single entity to control transaction inclusion.

6.2 Single Secret Leader Election (SSLE)

SSLE is a further refinement to the validator selection process in Proof-of-Stake. Currently, the identity of the next block proposer is known in advance. While this simplifies the protocol, it opens a window for targeted denial-of-service (DoS) attacks against the proposer or attempts to influence their block production by MEV searchers.

  • How SSLE Works: SSLE uses cryptographic techniques to ensure that the identity of the next block proposer is revealed only just before their slot, or even after the block has been proposed. This makes it impossible for attackers to target the next proposer in advance.

  • Impact: Enhances network resilience against targeted attacks, further decentralizes the block production process, and reduces the potential for malicious MEV extraction by preventing sophisticated pre-block attacks.

6.3 Minor EVM and Consensus Layer Improvements

The Ethereum roadmap also includes a continuous stream of smaller, yet impactful, EIPs (Ethereum Improvement Proposals) that refine the Ethereum Virtual Machine (EVM) and the consensus layer. These include:

  • EVM Efficiency Upgrades: Introducing new opcodes (e.g., PUSH0 for more efficient stack manipulation, MCOPY for faster memory copying) and optimizing existing ones to reduce gas costs for common operations and enable more complex smart contract logic.
  • Protocol Simplification: Removing deprecated or underutilized features (e.g., changes to SELFDESTRUCT opcode) to reduce protocol complexity, simplify client implementation, and enhance security.
  • Consensus Layer Stability: Ongoing improvements to the Beacon Chain’s stability, finality guarantees, and validator set management to ensure the robust operation of the PoS network.

These seemingly minor upgrades collectively contribute to a more robust, efficient, and future-proof Ethereum, demonstrating the continuous research and development effort within the community.

Many thanks to our sponsor Panxora who helped us prepare this research report.

7. Impact on Ethereum’s Performance and Utility

The synergistic integration of Proto-Danksharding, the long-term vision of full sharding, the pursuit of statelessness, and the adoption of account abstraction, complemented by foundational improvements like PBS, is poised to fundamentally redefine Ethereum’s performance and utility. This multi-pronged approach addresses existing scalability bottlenecks, enhances network efficiency, and profoundly improves the user and developer experience, solidifying Ethereum’s competitive edge in the rapidly evolving blockchain landscape.

7.1 Enhanced Scalability and Throughput

  • Orders of Magnitude Increase in Transaction Throughput: EIP-4844 dramatically reduces L2 data costs, enabling rollups to process significantly more transactions per second for a fraction of the cost. While Ethereum’s L1 throughput remains constrained (around 15-30 TPS), the combined throughput of its L2 ecosystem can theoretically reach thousands to tens of thousands of transactions per second. Full sharding, as it progresses, will further amplify this, providing an immense data availability layer capable of supporting hundreds of thousands or even millions of TPS across various L2s. This positions Ethereum not as a single high-throughput blockchain, but as a secure, decentralized settlement layer for a vast ecosystem of high-throughput L2s.
  • Reduced Transaction Costs: The primary and most immediate benefit of EIP-4844 is the substantial reduction in transaction fees for users on L2s. This makes a wider range of dApps economically viable, from micro-payments and high-frequency trading to fully on-chain games and social applications that were previously too expensive. This cost reduction is crucial for mass adoption.

7.2 Improved Decentralization and Node Accessibility

  • Lower Hardware Requirements for Nodes: The push towards statelessness through Verkle trees and state expiry will significantly reduce the storage and processing demands on Ethereum nodes. This lowers the barrier to entry for individuals to run full nodes, fostering greater decentralization and network resilience. More diverse participants validating the chain reduces the risk of single points of failure or cartelization.
  • Mitigation of Centralization Risks (MEV, Censorship): PBS and SSLE are crucial in addressing potential centralization vectors arising from MEV extraction. By democratizing block production and making proposer identities unpredictable, these upgrades reinforce Ethereum’s commitment to censorship resistance and fair transaction ordering, maintaining its core values.

7.3 Revolutionary User Experience and Security

  • Account Abstraction’s Transformative Potential: Account abstraction (EIP-4337) is perhaps the most user-centric upgrade. It fundamentally rethinks how users interact with the blockchain. Features like social recovery, multi-factor authentication, gas abstraction (paying fees in ERC-20 tokens or having them sponsored by dApps), and batch transactions will make Web3 applications feel more intuitive, secure, and akin to Web2 experiences. This significantly reduces the friction for new users entering the ecosystem, eliminating complex concepts like seed phrases and gas top-ups.
  • Enhanced Security: Beyond user convenience, AA allows for more robust security models built directly into the account logic, offering greater protection against theft and loss of funds compared to the current EOA model.

7.4 Fostering Innovation and Competitive Advantage

  • New Application Paradigms: The combination of cheaper transactions, higher throughput, and a vastly improved user experience unlocks entirely new categories of decentralized applications. Developers can build more complex, interactive, and high-frequency dApps that were previously infeasible due to cost or technical limitations.
  • Solidified Ecosystem Leadership: By continuously addressing its technical challenges and adapting its roadmap, Ethereum strengthens its position as the leading smart contract platform. Its modular approach – a secure and decentralized L1 as a settlement and data availability layer, complemented by a vibrant ecosystem of specialized L2s for execution – provides a scalable and robust architecture that differentiates it from monolithic L1 competitors.

In essence, these upgrades collectively transform Ethereum from a powerful but often congested network into a highly performant, user-friendly, and infinitely scalable platform. They are crucial for maintaining its relevance and leadership as the foundational layer for the decentralized future.

Many thanks to our sponsor Panxora who helped us prepare this research report.

8. Conclusion

Ethereum’s journey from its foundational whitepaper to its current state reflects a relentless pursuit of its vision to be the world’s decentralized computer. The challenges related to scalability and transaction efficiency, which emerged naturally with increased adoption, have been systematically addressed through a meticulously planned and iteratively implemented series of network upgrades. These upgrades are not mere incremental improvements but represent a profound architectural transformation of the network.

The implementation of EIP-4844, or Proto-Danksharding, has already delivered tangible benefits by dramatically reducing data availability costs for Layer 2 rollups through the introduction of ephemeral ‘blobs’ and an independent fee market. This critical step has made L2 transactions significantly cheaper and more efficient, directly impacting user accessibility and fostering a healthier rollup ecosystem. This initial success also lays the cryptographic and operational groundwork for the even more ambitious vision of ‘full sharding,’ which aims to horizontally scale Ethereum’s data availability to unprecedented levels, supporting an incredibly high throughput for a diverse range of decentralized applications.

Concurrent with scalability efforts, the pursuit of ‘statelessness’ through the adoption of Verkle trees promises to fundamentally reduce the resource requirements for running Ethereum nodes, thereby enhancing network decentralization and making the protocol more sustainable long-term. Simultaneously, ‘account abstraction,’ particularly through EIP-4337, is poised to revolutionize the user experience, making interacting with decentralized applications as intuitive and secure as using traditional Web2 services, removing barriers like complex key management and native token gas payments.

Furthermore, ongoing refinements such as Proposer-Builder Separation (PBS) and Single Secret Leader Election (SSLE) underscore Ethereum’s unwavering commitment to mitigating centralization risks and enhancing censorship resistance, ensuring that the network remains robust and decentralized even as it scales. These technical advancements are not isolated features; they are synergistic components of a comprehensive roadmap that collectively transform Ethereum’s performance, expand its utility, and fortify its competitive standing in the global blockchain landscape. By embracing this modular and iterative approach, Ethereum is positioning itself for sustained growth and innovation, cementing its role as the foundational layer for the decentralized future.

Many thanks to our sponsor Panxora who helped us prepare this research report.

References

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