Innovation | March 22, 2024

Image: Rug Radio/Decrypt. Vitalik Buterin at ETH Taipei 2024

Vitalik Buterin latest thoughts from ETHTaipei’s conference hackathon yesterday including Rainbow Staking and Layer 2 Usage post Dencun update

Yesterday at ETHTaipei’s conference hackathon, Vitalik Buterin, Ethereum’s co-founder, shared his latest thoughts and introduced “Rainbow Staking” as a way to combat growing centralization concerns around staking.

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He also talked about the surprisingly low Layer 2 (L2) usage since the Dencun upgrade, sparking discussions on the future of Ethereum’s scalability and decentralization.

Rainbow Staking

• Today, solo stakers must contribute 32 ETH to become network validators or they can opt to delegate their tokens to third party staking solution providers, and as such liquid staking solutions such as Lido, dominate the market with 61.36% share posing a centralization risk to Ethereum’s decentralized ethos.
• Rainbow Staking would be a mechanism designed to encourage more solo stakers by making the process more accessible and economically viable, despite the technical and financial barriers.  It would distinguish between “heavy” and “light” staking, with the former being slashable and the latter participating through a lottery system. This dual approach aims to enhance network security by leveraging the strengths of both staking methods.

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• Buterin acknowledged that Rainbow Staking raises philosophical questions about incentivizing participation in network security and that that concept needed more research and development.

Layer 2 Usage Post-Dencun: Below Expectations

• Despite the successful implementation of the Dencun upgrade, which introduced blobs to reduce L2 gas fees significantly, Buterin noted that the actual usage of L2 networks has been lower than anticipated.
• Although L2 networks have seen an increase in transaction volume, the expected surge in usage has not materialized. This discrepancy suggests that the full potential of L2 networks in enhancing Ethereum’s scalability and reducing costs is yet to be realized.
• Ethereum core developers remain optimistic about the future integration of L2 solutions and the eventual increase in blob usage. The current low gas fees on L2 networks offer an opportunity for growth, with expectations of rising demand and transaction costs as more networks adopt Dencun.

Why This Matters

The developments in Rainbow Staking and L2 usage are key towards solving the blockchain trilemma of achieving scalability, security, and decentralization, and for Ethereum to maintain its market dominance amidst growing competition from Solona, Avalanche, Binance Smart chain and others.

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By lowering costs and increasing speed through L2 integration, Ethereum aims to retain and attract users looking for efficient and affordable blockchain solutions.

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