Conversation Vitalik Buterin: The combination of sharding and Rollups will bring a 10,000-fold increase in capacity

Conversation Vitapk Buterin: Combination of sharding and Rollups to deliver 10,000-fold expansion

Original source: Lex Fridman Podcast

South Wind, Unitimes

Recently, Ethereum co-founder Vitapk Buterin participated in an interview with blog host Lex Fridman, We talked about cryptocurrencies, regulation, MEV (miners can extract value), Ethereum 2.0, POS security, Layer 2 (Rollups), big mergers, Polygon, and more. The interview lasted about 3 hours. This article was edited from the interview. For complete content, please refer to the interview video. The following is excerpted from the interview:

Lex Fridman: Shiba Inu was founded in 2020, modeled after Dogecoin, where you're given 50% of the total supply of Shiba, and you "destroy" 90% of what's given, which is worth $6.7 billion, And you gave 10 percent -- $1.2 billion at the time -- to the Indian COVID-19 Repef Fund, saying you didn't want that much power.

Vitapk: Let me start with the background of these coins and the story of how they were given to me. Dogecoin was first created around 2014 as a joke, and at first people didn't take it seriously. I invested $25,000 worth of Doge in 2016, and I was wondering how to explain to my mom that I had invested my money in these Dogecoins. The only interesting thing about this coin was that it had a dog logo on it, and it turned out to be one of my best investments. And then at the end of 2020, Elon Musk started talking about Degecoin, and by that time its market cap had skyrocketed to $50 billion, and it had skyrocketed multiple times, like the first time it went from 0.8 cents to about 7 cents, and that happened in a day. I remember being in Singapore and seeing the price go up by more than 100%, and I thought my Dege was worth a lot of money, and I sold half of my Dege, got 4.3 million dollars and gave it away. Within hours, the price dropped from about 7 cents to 4 cents. So I sold Doge at the top, thinking I was a great trader. Then the Doge went from 4 cents to 7 cents to 50 cents. Doge became a big deal, and a lot of people who had never heard of Ethereum had heard of Doge. This is something I didn't expect.

And then some people think, well, if Doge is worth $50 billion, then you should be worth billions of dollars if you copy it, and I think that's the idea behind Shiba and others. But they gave me 50 percent of the Shiba supply directly, but they weren't the first project to give me coins. Around the end of 2020, there was a project called Tellor, which I think was a competitor to ChainPNK, and I remember they sent me 50,000 dollars worth of coins, and they went around saying, "Look, VitapK owns our tokens. He is one of our supporters." After realizing this, I publicly sold their tokens through Uniswap, putting an end to this rumor.

But Shiba and other people were smarter. Instead of sending the coins to my address, they sent them to my cold wallet. Then I noticed that a lot of people were talking about it, and I was donating billions of dollars worth of coins, and after I got the keys to my cold wallet, I started selling some coins and donating some of them directly to a couple of charities. I actually sold off 80% of ShibA and donated the ETH to a number of organizations, and then directly donated 20% of ShibA, including COVID-India Relief Fund and others.

Lex Fridman: What do you think about the regulation of blockchain? What's the best case and worst case?

Vitapk: The best case scenario is that the blockchain continues to thrive, and then we find a way to scale the blockchain so that people can do all kinds of things on the blockchain, which is all these incredible things that people have been talking about, and then there are a lot of great applications running on the blockchain, DAOs that allow people to interact in better ways, artists to benefit better, etc., and then get enough popular support to make people aware of the many good things cryptocurrencies can do, as well as other innovative potential that remains to be understood.

The worst thing that can happen is that people suddenly think that this technology is being used by some bad people, but I don't think the government can stop the existence of blockchain, but they can marginalize it, such as banning all exchanges and banning all mainstream employers from accepting and using cryptocurrency payments, making it less of an impact. Obviously I hope something good happens.

Lex Fridman: Let's talk about Ethereum 2.0. How will ETH2 make Ethereum more scalable, secure and sustainable?

Vitapk: The reason we've actually de-emphasized the term ETH2 recently is that initially we had a big, red vision where all the good things would happen at the same time: a new blockchain and a new protocol. We slowly changed the roadmap to a more gradual format, PoS and Sharding happen over time, as do all the features and features, although it's a seamless experience for the average Ethereum user, probably a bit more complicated than the previous hard fork upgrade. But it's not that complicated from the user's perspective.

Once thought to be the two flagship features of Ethereum 2.0, it is now only thought to be the next flagship features of Ethereum evolution, namely PoS and Sharding. PoS is a consensus algorithm or consensus mechanism. Consensus mechanism is the way that network nodes are linked for which block or which transaction in what order, to ensure that once a block is linked, the chain cannot be reversed again.

Currently exist, such as COINS and etheric fang block chain using PoW, basically there are a lot of computers in the network (nodes) agreed to accept the block, and sometimes two blocks will be released at the same time, so you need to agree on the order of a block, so we need a "voting game" (vote). But it can't be "one person, one vote," because some bad guy might have 100 billion virtual machines on his computer, so he might have 10 billion virtual nodes, and then he might own 99 percent of the network nodes and control everything on the network.

To prevent this from happening, both PoW and PoS allocate your voting weight on a proportional basis based on how many economic resources you contribute to the network. So in PoW, you have to prove how many economic resources you have, which is how many computers you have and run them 24*7, and it really works, because if you want to attack the network, you have to put more computers and more money and more power, and the cost is very high.

In PoS, instead of contributing computing power through 24*7 as in PoW, you only need to pledge a certain amount of money into the system as an economic resource. I have loved PoS for many years because it requires less resources, unlike PoW, which requires purchasing mining equipment from a manufacturer and consuming a lot of energy, PoS only needs to run on a regular computer, you can run the PoS Verifier node on the regular computer you are using now. So it has to be less resource-intensive and less environmentally burdensome. Another reason is that, based on POS, blockchain does not have to pay as much as PoW to the people who maintain the network (miners). Currently, both Bitcoin and Ethereum provide about 4% of the total supply to miners each year. Ethereum issues about 4.7 million new ETH per year out of the current total supply of 115 million ETH. But through POS, we expect to add around 500,000 to 1 million ETH per year, which means that the total supply will not increase too fast.

Lex Fridman: How secure do you think POS is?

Vitapk: I think POS is very safe, because if you want to successfully attack the Ethereum network, then basically you need to have the equivalent of the amount of ETH pledged in the entire network, like right now we have 5 million ETH being pledged (in the beacon chain), Then you [the attacker] need to have 5 million ETH and join the network, which is worth about $15 billion, which I think is more than the cost of attacking the Bitcoin network; Secondly, PoS is much easier to recover from an attack than PoW, we have a lot of anti-attack measures in PoS, for example we have automatic slashing that will destroy the coins pledged by the perpetrator, and the community can also coordinate soft forks to respond to attacks. Attackers will lose a lot of coins in the new chain.

Lex Fridman: Some people see MEV (miner extractable value) as a threat to Ethereum. What is MEV and how can we deal with it?

Vitapk: A MEV (Proposer Extractable Value) problem exists in both POW and POS, also known as Block Proposer Extractable Value (PBEV). The basic idea is that if you have the ability to package blocks for which transactions and in what order, then you can take advantage of that for financial gain, not just through transaction fees, for example by jumping the race or trailing other people's transactions, allowing the block proposer to get a percentage of the proceeds.

This phenomenon is a challenge because first of all it sometimes degrades the user experience and puts the user in a bad position to trade, and there is a greater risk that the economies of scale MEV brings to miners or verifiers could lead to more centralization of PoW mining or POS verification. So the ecosystem has taken MEV seriously, and projects such as Flashbots are already under way. It is a risk, but we are doing something to deal with it.

Lex Fridman: Let's talk about the concept of scaling, specifically Layer 1 and Layer 2 and how they interact, and the idea of sharding.

Vitapk: There are two paradigms for scaling blockchain, namely Layer 1 scaling and Layer 2 scaling. The L1 extension is a mechanism that enables the blockchain itself to process more transactions, despite the performance limitations of the blockchain itself. Instead of making changes to L1, L2 scaling creates protocols on the chain that inherit L1's security, while a lot of things are going on down the chain, so you can get more scalability. In Ethereum, the most popular L2 paradigm is Rollups, and the most popular L1 scaling paradigm is sharding.

Lex Fridman: One of the ways to expand the blockchain is to increase the block size. Before we talk about Sharding, can we talk about the block size debate?

Vitapk: This is a tradeoff between better writing to the blockchain (that is, making transactions on the blockchain) and better reading the blockchain (that is, having the node verify that the transactions on the chain are correct). Both are equally important in terms of decentralization. If the cost of reading a blockchain is high, it means that people need to trust a few nodes that can change the rules of the blockchain without the consent of others. If writing to a blockchain is expensive, everyone will move to a very centralized secondary system.

So I think there is a balance to be struck between the two, and leaning one way or the other will lead to the development of blockchain in an unhealthy direction. I think there are two main reasons for the current Bitcoin block size of 1 Megabyte. One is that they think it's really important to be able to read the blockchain; The second is that many people maintain the rule of not hard forking it. The larger block size means that the blockchain will be more centralized, as fewer people will be able to run the nodes, and there is the potential for hard forks.

Lex Fridman: So what is sharding? What are the features of sharding?

Vitapk: Sharding is not about adding parameters like increasing block size, but about changing the architecture of the blockchain so that a single node in the network only needs to store a portion of the entire network's data and process a portion of its transactions. The challenge of adopting this model and applying it to blockchain is that blockchain is not just about dispersing data across the network, it is about agreeing on the data that is distributed across the network and making sure that the agreed data is correct. So there is a paradox, for example, if you need a blockchain that can process 10,000 transactions per second, but each computer node in the blockchain can only process 100 transactions per second, how can a single computer trust other computers without verifying all the transactions?

There are a number of ways to do this, such as by randomly shuffling verifiers, such as 10,000 verifiers in a POS chain. For simplicity, let's assume that each verifier pledges the same number of coins and randomly shuffles the verifiers. 100 of these validators (forming a committee) are assigned to validate one block, another 100 validators are assigned to validate another block, and so on. Then, the way of valid information broadcast is that 100 verifiers will sign on a certain block when verifying it, to show that they agree with the validity of this block, and then all the signatures of this block will converge into one signature and broadcast it to other verifiers in the network, so that other verifiers only need to verify the signature. You don't have to directly verify the transactions in that block. When other validators see this signature, they do not directly believe that the block is valid, but rather that most validators in the block agree that the block is valid. So if I believe that most of the blocks verifier is honest (because the verifier are randomly assigned, and attacker can take control of the verifier all nodes into the same committee, said that the attacker control node can be random disturb), then the illegal blocks will not be included in the block in the chain. This is a simple form of sharding.

There are other, more intelligent forms, such as the concept of ZK-Snarks, also known as a zero-knowledge proof, which is an idea of generating crypto proofs, which means to generate a proof by running some complex operations on a piece of data. If this proof is generated, such as if you see a ZK-Snarks proof that a block is valid, then you can believe that the block is valid. There is also a method called Data Availability Samppng, which lets you be sure that the data in the block has been published. Basically, if you stack these methods together, you can create a blockchain system where individual participants can trust that everything that happens on the chain is correct, without having to verify it themselves. So this is Sharding.

Lex Fridman: As far as I know, Ethereum is proposed to implement 64 shards. How does this scale up? Is this quantity fixed? Is that how it's scaled up to compete with credit cards or Visa?

Vitapk: Over time, the number of 64 shards can be increased by hard forking, and theoretically 1024 shard chains can be achieved. More sharding chains can be challenging, such as having a logic to check and manage all these shards, and having too many shards can be more expensive, but you can improve a little. And the other thing that we're doing is combining Sharding with Rollups.

Lex Fridman: Oh, Rollups. So let's talk about the idea of L2,

Vitapk: The basic idea of a Rollup is that users send transactions to a central aggregator, and theoretically anyone can be an aggregator in a Rollup, a permitless mode. What Aggregator does is they culle all of the transaction data that's not relevant to the updated state, and then they keep the data that's needed to update the state and compress it, so they just publish this little bit of compressed data on the chain without having to publish all of the transaction data. The amount of data posted on the chain might be reduced tenfold.

The other thing is that you don't compute on the chain, you compute off the chain. There are two ways to do this, one is ZK-rollup, which is to provide a ZK-snark proof that says "I did the calculation, here's a proof of my computational hash," and then submit that proof to the chain, and then everybody verifies that proof without having to verify all these transactions; Another method is the Optimistic Rollup, is basically someone claimed that he first thought the trading result is correct, then another person can oppose and claims that the outcome is not the same, if there are differences, you will need to release the whole block of data on the chain were tested, and the wrong one party will lose a lot of money.

As a result, Rollup can put 90% of the data and 99% of the computation down the chain, and then 10% of the data and 1% of the computation on the chain, resulting in an approximately 100-fold increase in scaling performance. These systems are already available for apps such as Loopring, a ZK-Rollup-based payment platform that allows you to deposit money to Loopring for a very low transaction fee, say 5 cents (instead of $5). While there are currently only a few applications available for ethereum Rollups, fully ethereum compatible Rollups are expected in the next few months. So combining Rollups with sharding gives you a 10,000-fold increase in scalability, giving you tens of thousands of TPS.

Lex Fridman: So this scalability allows you to process large volumes of transactions faster and at a lower cost.

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