Vitalik Buterin's Lecture at Nanyang Technological University | Reviewing the Current State of Ethereum: Slowest Progress in Smart Contract Security

Ethereum founder Vitalik Buterin delivered a keynote speech titled "The Past and Present of Ethereum" at Nanyang Technological University in Singapore on September 6, where he recounted Ethereum's journey from its initial concept to the practical challenges it faces today. Blockchain media outlet DeThings has released the full transcript of the speech. Below is a summary.

Original link: DeThings Exclusive: Vitalik Buterin's Nanyang Technological University Speech

The Birth of Ethereum

Vitalik Buterin stated that he and his co-founders released the white paper in 2014, and Ethereum is a decentralized system similar to Bitcoin.

Unlike earlier blockchain systems that attempted to support only one application, Ethereum allows users to build their own applications. Users can write application code, upload it to the blockchain, and run the applications on the chain.

Colored Coins was an early attempt to issue assets on the Bitcoin chain. One of Vitalik's original ideas was to issue assets on the Bitcoin chain, but now tokens like ERC-20 can be issued on Ethereum.

The Realization of "Smart Contracts"

The concept of smart contracts is that users can structure computer programs on the chain that can directly control digital assets. This design concept can be used to implement more and more complex applications, such as:

• Prediction markets

• Financial instruments

• Stablecoins

• Leverage

• DAOs

These various applications can all be defined through smart contracts. Vitalik mentioned DAOs:

Although many projects globally are adopting DAOs with different logics and have been operating for many years, DAOs have not yet been widely adopted outside the Ethereum ecosystem.

He specifically mentioned that the development of NFTs has amazed him, but essentially, the existing applications today are very similar to their ideas from 10 years ago.

The Transition of "Consensus Mechanism"

Ethereum completed The Merge on September 15, 2022, transitioning from Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism.

Vitalik pointed out:

The PoS consensus mechanism significantly enhances security and reduces Ethereum's energy consumption by over 99.9%. Previously, Ethereum's energy consumption was almost equivalent to 40% of Singapore's, but now it has been reduced to nearly zero, which is the result of our work in the ecosystem for nearly 10 years.

The Technological Progress and Challenges of Ethereum

Vitalik stated that the challenges Ethereum faces today are almost the same as 6 years ago, including:

• Privacy

• Consensus mechanism

• Scalability

• Smart contract security

I. Privacy Technology Faces Regulatory Issues

However, he finds the progress in privacy since 2017 quite interesting. For instance, the new cryptographic technology "zero-knowledge proofs (zk-SNARKs)" first adopted by Zcash. Vitalik explained:

When you spend a token in Zcash, it doesn't directly point to the token you are spending. Instead, a proof is needed to show that you are spending an unspent token without revealing any other information about that coin. You prove the necessary statement but keep all other information concealed.

Through smart contracts, Ethereum can also build applications on the chain with the same privacy protection logic, as was the case in 2017. By 2023, Ethereum has very advanced zk-SNARKs databases, development environments, tools, and protocols, including interesting technologies like Stark, ZK Rollup, Cairo, and more.

He also mentioned the regulatory and legal issues that privacy faces, such as Tornado Cash, for which developers have proposed the concept of "proof of innocence" to allow users to transfer tokens through a privacy system without disclosing the source of the tokens. Vitalik mentioned that a paper integrating solutions from several companies will be released soon, but there are still many details to be improved.

II. Slow Progress in Smart Contract Security

Vitalik believes that despite many security issues being resolved in a low-key development process, smart contract security is still the slowest progressing area. He cited The DAO hack incident in Ethereum in 2016, which ultimately led Ethereum's key leaders to take emergency measures: a hard fork to protect significant assets in Ethereum.

Although developers have been working to improve code security and the proportion of hacker attacks has decreased, Vitalik pointed out that the complexity of current projects has increased by 20 times compared to projects in 2016:

If the project you are building now is not 20 times more complex than in 2016, it is generally considered quite secure.

He concluded that although the progress in Ethereum's security is impressive, there is still room for optimization.

III. Limited Scalability of Ethereum

Vitalik cited data showing how important scalability is for Ethereum:

As of today, Ethereum can only process 10 to 20 transactions per second. In fact, this depends on the complexity of transactions and the amount of data, ranging from 10 to 50. Currently, this level of scalability is very limited. To support mainstream finance, payments, and global systems, we need to process about 100,000 transactions per second. If only 20 transactions can be processed per second, then a million people worldwide would need 4 million seconds, roughly 13 years, to execute a transaction on Ethereum. Therefore, improving scalability is crucial.

Reality and Practical Applications

Vitalik recounted his profound experience in Argentina in 2021, where real people were adopting cryptocurrencies:

I remember on Christmas Day when many shops were closed, I found a coffee shop, and the owner recognized me. I asked if I could pay with ETH, and he said yes, so we paid with ETH. But there was a catch; he was not using the Ethereum mainnet but Polygon. This is why I appreciate what DeFi is doing. It makes cryptocurrencies more accessible to those without banking systems. Without DeFi, they would have no other choice. I think these alternative solutions are good.

From the above example, Vitalik pointed out that while developers strive to achieve decentralization standards technically, it may not mean much to users.

He hopes that Ethereum, as an ecosystem, will gradually reduce single points of failure in the future. Although the Ethereum Foundation agrees and is working to address issues and become more decentralized, these decentralized elements are not felt by that coffee shop owner.

Therefore, balancing optimization for real-world applications while maintaining decentralization poses a significant challenge for developers.

Vitalik concluded:

These are some of the significant changes we have seen in the past 10 years, from Ethereum's initial concept to gradually solving real-world applications and facing various challenges. It has been a long journey, and I hope that in the next 5 years, we will be able to address most of these challenges.