Proof of Stake Is Coming To Ethereum Sooner Than We Think
As more artists and creatives use Ethereum to mint NFTs, so too has a five-year-running question been fervently revived: when will Ethereum turn off the energy-intensive Proof of Work consensus mechanism, and replace it with Proof of Stake? The good news is since the Beacon Chain launched in December 2020, Proof of Stake (PoS) is technically already here. More than one-hundred thousand active validators are staking a combined 3.4 million ETH (nearly $6.3 billion in dollar terms). This new PoS system, part of the overall network upgrade called Ethereum 2.0, is running smoothly. So when can the Ethereum community start benefiting from it?
Open source development ≠ clean roadmaps
Ben Edgington, Product Lead of Teku, ConsenSys’ Eth2 client wrote in 2019 that Ethereum’s “bazaar” model of development would pay off in 2020. For those that are not familiar with Eric Raymond’s classic 1997 essay on open source development, “The Cathedral and the Bazaar,” it’s thesis is that when you let a broad group participate in the development of a software project, it can seem chaotic and noisy, but ultimately yields more productive and enigmatic design structures. Linux is the best example of a bazaar model of software development, and as Ben points out, “doesn’t have much of a roadmap either.”
Ethereum 2.0 has also followed this bazaar model: engineers from around the world can participate in developer calls, submit GitHub issues, post ideas on Ethresear.ch, or take their gripes to Twitter, Telegram, or Discord. Discussion is constant, and revisions to the Eth2 roadmap are a feature, not a bug.
In 2020, we attempted to describe the roadmap in a linear fashion. Phase 0 would launch the Proof of Stake Beacon Chain. Check. Done. Phase 1 would implement shard chains. Phase 1.5 would merge the original PoW Ethereum blockchain with the new PoS chain, and Phase 2 would attempt communicating data between these various shards. What’s changed?
What the Eth2 development community didn’t anticipate was just how quickly Layer 2 solutions like Rollups would advance by 2021. Rollups are a Layer 2 technology that takes much of the burden of computation and storage out of the blockchain, and uses the chain just enough to benefit from its security guarantees. Popular DeFi protocols are beginning to test their applications on L2s, with some already functional for swapping ERC-20 tokens and $250 million locked up in liquidity. The derivatives platform, Synthetix announced that SNX staking would go live on Optimism, which uses optimistic rollups. They demonstrated a decrease in gas costs by 143 times (!), and a transaction confirmation time of 0.3 seconds. Uniswap demonstrated the user experience improvements that are possible with Optimism. Gas costs for swaps decreased by 10-100 times, and transactions were confirmed in a lightning-fast 139 milliseconds. Optimism is now set to launch their mainnet sometime this month.
Rollups are now a key part of Ethereum 2.0’s roadmap, which means implementing shard chains can wait. This also means that moving Ethereum off Proof of Work and onto Proof of Stake can happen even sooner, perhaps this year.
An Executable Beacon Chain
Near the end of last year, Mikhail Khalinin of ConsenSys published a model for Ethereum 2.0 which would use the Beacon Chain as the execution environment. Put more simply, this would mean building the Ethereum Mainnet directly onto the Beacon Chain, effectively turning on Proof of Stake for all future transactions on Ethereum. The added benefit is that the move to PoS will be minimally disruptive to current dapps, tooling, and users. We just get to turn off mining.
Mikhail and Guillaume Ballet from the Ethereum Foundation presented a model at the most recent Eth2 Core Teams Online Workshop in February. The proposal has since received feedback from attendees, researchers, and other client teams. It was also discussed on the Ethereum All Core Devs call on February 19th, meaning it is no longer just relegated to Eth2 discussions, but part of the broader Ethereum protocol development.
Today marks a big next step in the development of upgrading Ethereum’s consensus to Proof of Stake. Mikhail submitted a GitHub pull request for Eth2 specification to create a version of the Ethereum Mainnet with PoS consensus driven by the Beacon Chain. The pull request is a work in progress, and steps need to be completed to run more tests with a stubbed and application payload, among other revisions. Such a significant upgrade would mean some reworking of Eth1 clients, and will need further feedback from the client team developers. There will also likely be some minor JSON-RPC changes for dapp developers. You can contribute here.
Also today on the Eth2 implementers call, Danny Ryan suggested stripping back the merge proposal in order to get to PoS even quicker. He suggested it, “might exclude validator withdrawals,” leaving that update for 3-4 months later.
Perhaps most socially complicated (given the recent opposition to EIP 1559 from miners) is the actual moment of “docking” the current Ethereum chain to the Proof of Stake Beacon Chain. This procedure will be fraught, and may require some incentivization on miners up to the point of merging and beyond.
As for the overall Eth2 protocol, creating an executable Beacon Chain will greatly reduce the complexity of cross-shard communication and transactions. That now becomes an area of focus for Layer 2 protocols, with some like Polygon already working bridges between multiple EVM compatible networks. Vitalik Buterin also published a recent proposal for how two protocols using rollups can communicate with each other while maintaining compatibility.
So, about the environmental cost of NFTs
There is no denying that global warming is the crisis of our generation, and there absolutely must be a critical lens applied to every technology. While artists will continue to contend with ethical decisions around the energy usage of PoW systems, or even offset their NFTs with carbon credits, it is no longer a meme that Proof of Stake is coming soon. By accelerating the upgrade of the Proof of Stake consensus mechanism, we are much further on the path to reduce Ethereum’s energy consumption by 99%. This is not just hand wavy stuff. It’s happening now — transparently discussed in open source repositories.