Ethereum's Three Transitions

The man himself @VitalikButerin dropped the Three Transitions that he sees are required for #Ethereum to create a better, faster and more secure network:

1. The L2 scaling transition

2. The wallet security transition

3. The privacy transition

Let's break each of them down, but before we do, a few notable stats.

Ethereum is the backbone of #DeFi and the revolution blockchain has set out to create. Some figures to back that statement:

• $52.5B Total Value Locked

• 316,472 Active Users

• 813 Protocols (and counting)

• 24H volume: $804.21M

• 24H Fees: $5,618,338

• Stables: $68.25B

While stats like $52.5B in TVL are impressive, they pale in comparison to the peak of the last cycle where we topped out at $100B! Interestingly, Active Users and Transactions have remained somewhat flat. So imagine the number of users and tx required for the next bull market!

The next cycle is exactly what Vitalik has his eyes on for Ethereum to stay relevant. Adapting these three transitions will be challenging but necessary for Ethereum to continue providing a seamless user experience, so let's break them down:

The L2 scaling transition

L2 scaling is crucial for Ethereum's growth, as it reduces tx costs and makes the network ready to the masses.

Vitalik's vision for a more scalable Ethereum will enable it to remain competitive, attract users, and drive global adoption.

Ethereum will fails if tx costs are not brought down. Mass market won't accept tx costs of $3.75 ($82.48 if we have another bull run) Every dapp aiming for the mass market inevitably forgets about the chain and adopts to wherever costs are low.

The wallet security transition

Wallet security is essential for users to feel comfortable storing their funds and assets on the Ethereum network. Improving wallet security will be critical for Ethereum to continue being the one-stop shop for all things DeFi.

In the (near) future, wallets will need to secure both assets and data, as users' private keys will hold more than just access to their funds. Finding the right balance between security and usability will be crucial for the success of Ethereum wallets and mass adoption.

Vitalik's suggestion is to create smart contract wallets. Smart contract wallets add more complexity, by making it much more difficult to have the same address across L1 and the various L2s. With smart contract wallets, however, keeping one address becomes more difficult.

The privacy transition

Privacy is vital to protect users' data and prevent them from moving to centralized solutions. Achieving privacy on Ethereum, as envisioned by Vitalik, will be a game-changer, enabling a wide range of use cases while preserving user privacy.

Privacy requires each user to have even more addresses, and may even change what kinds of addresses we're dealing with. If stealth address proposals become widely used, instead of each user having a few addresses - or one address per L2 - users might have one address per tx!

These three transitions are crucial, but they are also challenging because of the coordination required. It's not just features of the protocol that need to improve; in some cases, the way that we interact with Ethereum needs to change pretty fundamentally!

This is why Vitalik lays out in great detail how he sees these transitions being implemented. The solutions and suggestions are rather technical and long, which is why we encourage you to read more in the full blog post.