Solana is rising again, ETH's market performance is far below expectations, the exchange rate of ETH to Bitcoin keeps hitting new lows, and the Ethereum Foundation address frequently sells ETH, with an annual expenditure budget of about $100 million. Vitalik was forced to reveal that his annual salary is 182,000 Singapore dollars. Recently, the Ethereum Foundation has received unprecedented attention.
After 8 months, the Ethereum Foundation research team held the 12th AMA on the reddit forum, answering many questions. At 9 pm Beijing time on September 5, the Ethereum Foundation research team began to answer questions one after another, including the reasons for the rise in ETH prices, how long it will take for the Ethereum Foundation's funds to run out, blobs (EIP-4844), ZK and Rollup, etc.
BlockBeats has BlockBeats out the questions and answers and compiled them into a text. It should be noted that the core developers have their own opinions and speculations on certain topics. To avoid misinterpretation, please refer to the original post link attached.
What are the reasons for the increase in ETH price? Does the Ethereum Foundation care about the price of ETH?
Q: What is the main logic behind ETH's rise in 2024?
Dankrad Feist: Ethereum is building a financial platform that will be the most neutral platform that can simultaneously: allow the issuance of financial assets, allow the trading of these assets, and allow the creation of new financial products such as derivatives based on these assets without permission.
This is a very valuable activity. Capturing value from it will likely be through some sort of fee mechanism. I think Ethereum L1 will be the intersection of multiple subfields, and a lot of valuable activity will be generated through fees (assuming L1 scales enough). If this is not the best mechanism, there are other options, such as capturing value through data availability fees, ETH as the primary medium of exchange, or using ETH as collateral (which is the riskiest option).
Anders Elowsson: ETH will appreciate when Ethereum facilitates sustainable economic activity. By "sustainable" I mean activity that brings utility to participating economic entities and ensures their long-term sustainability. In this case, the native ETH token will appreciate because: ETH is a trustless asset in the Ethereum ecosystem, making it worth holding and using as currency; Payments for economic activities settled/secured by Ethereum are made in ETH and are burned, effectively distributing value to all ETH token holders.
Justin Drake: ETH is money :)
Q: Is the Ethereum Foundation concerned about the continued growth of ETH prices? Why?
Dankrad Feist: The Ethereum Foundation has no opinion on this. As researchers, we each have our own opinions.
Personally, I think it's better to focus on building an ecosystem on Ethereum that generates value, and I believe that value capture will eventually happen naturally. This doesn't mean I don't think about it, but focusing on value capture when value generation is not yet sufficient is a huge mistake.
Anders Elowsson: EF may not consider everything, but individual researchers do, and I suspect quite a few think that the appreciation of ETH is important. One obvious reason is that Ethereum is secured by staked ETH, so the price growth of ETH ensures economic security. Another reason is that ideally, a currency should maintain its value over time, and ETH is the best currency in Ethereum. There is value in having reliable trustless currency in a decentralized economy, and the value of ETH therefore makes Ethereum a better platform.
The third is that a significant portion of future investment in the Ethereum ecosystem is likely to be held in ETH. This also includes the (not particularly large) treasury of EF. The fourth is a deeper consideration, that the value accumulation of ETH is closely related to the success of Ethereum, as further discussed in the answer to the next question.
Justin Drake: I personally believe that the price growth of ETH is critical to the success of Ethereum. I believe that if ETH does not become the de facto "Internet programmable currency", Ethereum cannot become the settlement layer of the "Internet of Value".
Monetary premiums will only be concentrated in one particular asset (considering tens of trillions of dollars). This monetary premium is necessary to: support trillions of dollars in decentralized stablecoins ("economic bandwidth"), provide unquestionable security even against nation-state attacks ("economic security"), and attract the attention of all major economic players ("economic significance").
Q: If when the rest of the roadmap is completed, the result is that various rollups are settled on Ethereum L1, there are a large number of decentralized applications on L2, user transaction fees are less than one cent, and the ecosystem develops well, but the price of ETH does not increase significantly, does this mean the success of the Ethereum roadmap?
Dankrad Feist: Again, I do not speak on behalf of the Ethereum Foundation, I am just expressing my personal views as a researcher.
When I build a startup, of course I hope to make money, but even if it ends up making nothing, I’ll still consider it a success if it works for my clients.
Applying this idea to Ethereum, I would consider it a success if we had a diverse rollups ecosystem that provided interesting applications to the world, but it would be an even greater success if this ecosystem also made the ETH asset more valuable.
Many people believe that a rollup-centric roadmap will weaken Ethereum's fee income and MEV, and that rollups may eventually become parasites. I do not think this is correct. The highest value transactions will still occur on Ethereum L1, and rollups will expand the entire ecosystem by providing users with a large transaction space. This relationship is symbiotic: Ethereum provides cheap data availability for rollups, and rollups make Ethereum L1 a natural hub for high-value transactions.
Anders Elowsson: In the long run, Ethereum's ability to facilitate sustainable economic activity is directly linked to ETH's price appreciation. If you design a system for sustainable economic activity, you are designing ETH's price growth. Vice versa, when designing ETH's appreciation, you must ensure that Ethereum facilitates sustainable economic activity.
Focusing on "price growth" in the short term without considering its source may lead to reduced value in the long term. I personally believe that the current roadmap is actually also a "price growth roadmap". If Ethereum succeeds, but ETH does not grow in price, I will be surprised and even a little disappointed, but this may be an opportunity to buy ETH because the market will eventually realize this price growth theory.
Justin Drake: I personally think that ETH's price growth comes down to money flow and monetary premium. For money flow, the key metric is total fees, not fees per transaction.
As I mentioned in my talk, the ultimate goal of Ethereum’s success is to reach 10 million transactions per second, which would still bring in billions of dollars in daily revenue even if the transaction fees were less than a penny. For example, $0.002 per transaction would bring in about $2 billion in daily revenue.
For the monetary premium, the key metric is the proportion of ETH used as collateral currency, such as supporting DeFi.
How long will it take for the Ethereum Foundation to run out of funds?
Q: How does the Ethereum Foundation ensure that the network remains neutral and does not require validators to censor certain specific transactions due to government pressure?
s0isp0ke: Over the past year, we (the Ethereum Foundation’s Robust Incentives Group (RIG) and other researchers) have been working on enhancing the Ethereum network’s censorship resistance (CR) properties, primarily by iterating on the Inclusion List (IL) design.
In short, ILs allow decentralized validators to collectively enforce the inclusion of transactions in blocks by block builders. This effectively reduces reliance on a small number of sophisticated entities that could arbitrarily decide which transactions can be included in Ethereum blocks (e.g., censoring transactions that interact with sanctioned addresses).
We’ve posted a few posts on ethresear.ch about this, the most recent being the Fork Choice Enforced Inclusion List (FOCIL): The FOCIL proposal . This scheme relies on multiple proposers working together to create an inclusion list of transactions that must be included in a block in order for validators to consider it valid. If you want to learn more, or have other questions, please get in touch!
Q: How long can the Ethereum Foundation's funds last? What is the response plan when the funds run out?
Justin Drake: Based on my limited personal knowledge:
1. Financial reports similar to the previous ones should be released soon.
2. The foundation spends about $100 million per year - see Aya's tweet.
3. The foundation’s main Ethereum wallet currently holds approximately $650 million in ETH.
4. The foundation also has a portion of fiat currency reserves, which is enough to cover expenses in the next few years. (This is the part I know the least about. As Aya mentioned, the sale of ETH was temporarily suspended for regulatory reasons, so this part of the reserve was not replenished until recently.)
A rough estimate is that the foundation has about 10 years of funds in reserve, but this period will vary greatly with fluctuations in ETH prices.
Ethereum Layer 1 Related
Q: Once the Rollup-centric roadmap is completed, are there still plans to expand Ethereum's L1? If so, what expansion methods are currently being considered?
Dankrad Feist: I do believe that scaling L1 execution should be a goal in parallel with building rollups. However, they are not necessarily in conflict:
1. Data availability can be almost infinitely scaled - the ultimate limit is the interest in Ethereum (i.e. how many people are conscientiously running full nodes and how many people are willing to record all the data).
2. Execution is always subject to some limitations, the ultimate limitation is the single-thread limit; currently, state access is the direct limitation for extending L1 execution.
3. With zkEVM and parallelization, I still think we will see scaling L1 to 10-1000x current capacity. Rollups will provide the remainder to reach “world scale”.
The good news is that all of this work is underway — and thanks to a rollup-centric roadmap, many teams are working on it in parallel in a more distributed way.
Justin Drake: The Ethereum Foundation's long-term sustainable plan is to use SNARKs to expand the EVM execution of the mainnet, which is basically unlimited.
With real-time L1 EVM SNARKing, validators can verify low-cost SNARKs without having to re-execute EVM transactions. This will allow us to significantly increase the gas limit without increasing the burden on validators. All the heavy EVM execution work will be done outside of consensus by specialized nodes operated by entities such as searchers, builders, and explorers. The burden on users and consensus participants will become light, such as they can run a node on their phone or watch.
In addition to the vertical scaling benefits of significantly increasing the L1 EVM gas limit, there is also the opportunity to use EVM-in-EVM precompiles for arbitrary horizontal scaling, verifying EVM execution within the EVM at low cost. This precompile will allow developers to programmatically launch new L1 EVM instances, unlocking a supercharged version of execution sharding, where the number of shards is unlimited (rather than capped at 64 or 1024 shards) and individual shards are programmable rollups (with programmable governance, ordering, gas), called "native rollups".
Q: What are the main areas of research of the Ethereum Foundation in zk at present? What theoretical or practical applications are being explored?
George Kadianakis: Here are some zk projects related to L1, at different stages of research maturity:
Using STARKed hashed binary trees for statelessness; using recursive SNARKs for large-scale recursive signature aggregation ; improving network layer robustness via zk anonymous credentials; using STARKs for post-quantum aggregatable signatures (instead of BLS); using ZK for privacy in single-secret leader election designs ; using ZK and zkEVM for L1 execution (long-term goal!)
Additionally, the EF Cryptography team has a broad interest in ZK research. You can find some of this work on the Cryptography team website .
Antonio Sanso: In a recent statement released by Ethereum Research, the cryptography research team stressed that a deeper understanding of verifiable delay functions (VDFs) is needed before they can be integrated into Ethereum. The team does not currently recommend the use of VDFs in Ethereum, noting that ongoing research and significant improvements are essential for a possible revision of this position in the future. For more details, see the full statement here .
Justin Drake: I'm really excited about the SNARKization of the L1 EVM. Huge progress has been made in the past few months. Uma from Succinct shared new data with me today: the cost of proving all L1 EVM blocks is now about $1 million per year, and significant optimizations are still being made. If this time next year, there will be SNARKs at all levels of the stack (compilers, arithmetic, proof systems, prover algorithms). Another exciting progress is that EF is accelerating zkEVM formal verification. This is an effort led by Alex Hicks and supported by a $20 million budget.
Blob (EIP-4844) related
Q: What research areas are most researchers focusing on currently? Do the blobs in EIP-4844 bring about discoveries or adjustments that change the research direction?
Davide Crapis: We are doing more work around blob pricing, motivated by previous analysis and also by the observation of its growing importance as a resource with a market that is very different from other resources (most demand comes from “enterprise customers” that are less elastic in the short term, like L2). We have new research underway with some partners that will be published in the next few weeks.
Q: Is there a problem with the existing blob base fee mechanism? Is there a situation where the blob gas fee will become too high, which will be unfavorable to L2?
Davide Crapis: There is certainly room for improvement in the current mechanism (see other questions about "blobs"). However, the situation you mention is not a cause for concern: remember that L1 data costs are passed on to L2 users and become part of the L2 fees. Therefore, when data costs increase due to congestion, the demand for L2 transactions will decrease, which will put downward pressure on the demand for blobs and thus reduce the price of blobs. Section 3 of the Arbitrum Nitro whitepaper is also a good resource for understanding the L2 fee structure.
Dankrad Feist: If blob fees increase, Rollups will charge users more transaction fees. This will naturally lead to fewer transactions on L2, just like what is currently happening on Ethereum L1.
Q: If blobs usage is not reaching the target (e.g. 3 blobs per block), should the target be lowered to ensure the fee mechanism works correctly?
Davide Crapis: No. The mechanism is designed to price congestion, so it is normal for prices to remain low if there is no congestion. However, demand is currently well below the target, which affects price discovery in the presence of congestion. Price discovery is very important in this context, and we should make the mechanism more efficient. In the short term, adjustments like increasing the minimum fee (but still keeping it very low!) or changing the update speed can help.
For details, see the discussion here: EIP-4844 Fee Market Analysis ; Latest Proposal: EIP-7762 Increase the minimum base fee for each blob gas .
Dankrad Feist: Ethereum is currently creating a new market for rollups - the data availability market. Many alternatives (such as Celestia, Eigenlayer, Avail, etc.) want to grab market share from Ethereum. They can't compete on security, so they want to win on price.
Even with 3 blobs per block, the revenue generated would not significantly increase Ethereum's protocol revenue. I think in the next few years we should strive to expand this area as much as possible without rushing to get fee income from it.
Regardless, I don’t think blob fees will be the best value capture mechanism for Ethereum. The data availability market moves too quickly — while Ethereum offers the best security, other “close enough” solutions can easily take over, making extracting value from them suboptimal. Ethereum L1, as the natural financial hub in the ecosystem, will have the highest value transactions, which is the best price growth mechanism for ETH.
Justin Drake: Blobs won’t fail to hit their target — we just have to be patient :) Induced demand takes time to show its effects. Another consideration is that some recent rollups (e.g. Base, Scroll, Taiko) have found ways to better utilize blobs. These rollup optimizations extend the timeline for blob price discovery, and for good reason.
other
Q: How is the proposal for a solution to Ethereum's over-issuance going? Is it possible to adjust the pledge ratio in a way similar to a PID controller instead of relying on a fixed issuance curve?
Davide Crapis: A controller is possible, but I think it's too complicated. We are able to express a demand curve and don't need to target a specific staking percentage value, but rather a range, so we should choose this simpler option. I discussed both options (the second option has been studied more since then) in my talk at CEE 2023: Ethereum Staking: The State of Things .
Justin Drake: Having a smarter issuance curve that tapers to zero at some soft cap (like 1/4, 1/3, or 1/2 of ETH is staked) is unquestionably the right choice in my opinion. The main bottleneck is social coordination. We need someone smart and motivated to push this EIP to mainnet. This is a very high-impact task and I expect the community to fully support it.
Q: What are the new developments regarding historical data expiration (EIP-4444) and portal networks? What is the status of Multidimensional EIP-1559? What are the current research directions for MEV? In addition, what resources (such as verkle.info) or recommended people to follow can help me keep abreast of these developments?
Barnabé Monnot: Hi! Regarding the third question, I suggest you check out this note I prepared for an internal research meeting last month, which may help you learn more. For ePBS, we have started a tracker and are constantly updating new materials as questions emerge.
More broadly, current MEV protocol research can be divided into two major directions. On the one hand, there are some relatively specific protocol upgrade proposals, such as ePBS and FOCIL (committee-based, multi-proposal style inclusion lists), which are under discussion. On the other hand, there are larger directions, such as APS (broad concepts around execution notes/auctions) or Braid. I personally hope that specific work can provide guidance for more exploratory research.
Q: You are working on VDFs (Verifiable Delay Functions), can you share how you plan to use them? What improvements have you made to existing VDFs?
Antonio Sanso: Mary Maller discussed VDFs in her Devconnect talk, which can be viewed here . I also presented on related topics at the 2024 IC3 Winter Retreat, event details can be found here .
Justin Drake: There are two aspects to VDFs: a) building a production-grade VDF as a cryptographic primitive, and b) using that primitive in an application.
Let me start with b) applications. The incentivized use case for VDFs on Ethereum L1 is to enhance RANDAO to obtain unbiased randomness for leader election. IMO VDFs are the ultimate goal for L1 randomness and remain a "splurge" item in Vitalik's roadmap . So far, there is no evidence that RANDAO is being abused, so VDF R&D has definitely been deprioritized relative to when I started down the rabbit hole a few years ago. Other L1 projects (e.g. inclusion lists, stake caps, SNARKifying L1) are more important.
Besides L1 leader election, another important use case for VDFs is lotteries. In my opinion, there is a low-hanging fruit to build a "world lottery" that is provably fair, worldwide, and commission-free. PM me if you want to build this :) Another interesting application of VDFs that has emerged recently is facilitating simultaneous release of blocks in the context of multiple proposals. In an unexpected turn of events, Max Resnick became a VDF bull.
Now to a), which has proven to be much harder than I expected (years of work!), but there is light at the end of the tunnel. We now have a MinRoot VDF ASIC that I believe can be used in lottery production, although theoretical MinRoot analysis has not yielded a practical attack on 256-bit MinRoot. We now need a team to do the integration work to verify MinRoot SNARK proofs on-chain (such as Nova or STARK proofs). This is easy for BN254 MinRoot, but Pasta curves require wrapper SNARKs. If you are interested in doing this integration work, please PM me :).
