Can Ethereum 3.0 Finally Overcome Scalability Challenges?

Introduction

The news regarding an innovative fix for Ethereum’s issues, including scaling and security, have been circling around the blockchain community a lot the last few days. The new Ethereum 3.0 update, which introduced its first phase through The Beacon Chain in late 2020, has been getting a lot of attention recently, as its next steps seem to include revisiting the sharding concept, mitigating protocol and centralization risks, and reducing data flow. 

The update is planned to be completed by 2026 but the remaining planned steps bring a lot of gossip as to how they could be executed and in the case they actually work - what would that mean for the Ethereum blockchain and its users. 

About Ethereum 3.0

Ethereum 3.0 is supposed to be the next big update for the L1 protocol, holding the holy grail of solutions to the scaling and other issues plaguing the performance and bandwidth of blockchain transaction traffic. 

Vitalik Buterin has posted multiple informational posts on social media explaining the vision for Ethereum’s future and how it can become better and faster. Ethereum’s improvement development has been ongoing practically since the launch of the Beacon Chain back in 2020. 

Here are some more details on the changes done so far towards ETH 3.0 since then:

 1. The Beacon Chain (2020) - Introduced Proof of Stake (PoS) in December 2020;

 2. The Merge (2022) - Beacon Chain was merged with the original Ethereum Proof of Work (PoW) chain in September 2022;

 3. Shanghai Upgrade (2023) - Hard fork which staked ETH withdrawals for the first time since The Merge;

There is also a current roadmap for further phases towards the completion of the ETH 3.0 update:

 1. The Surge - Focuses on improving Ethereum’s throughput, by increasing TPS to over 100 000 across both Layer 1 and Layer 2 networks, through the process of “sharding”, which divides the network into smaller separate chains (shards), which would simultaneously process their transactions; experts have even speculated the development of a zero-knowledge Ethereum Virtual Machine (zkEVM) at L1;

 2. The Scourge - Goal is to achieve transaction neutrality and resistance to censorship, to improve fairness, and to avert protocol risks from MEV, by preventing the acquisition of centralized control through the implementation of proposer-builder separation (PBS);

 3. The Verge - Aims to reduce node resource requirements and to make Ethereum more decentralized by enabling the protocol to operate on smaller devices such as smartphones and through “stateless verification”, which allows for block verification without the need to store vast data; 

 4. The Purge - Goal is to reduce data bloat and simplify the Ethereum protocol by removing old network data in order to streamline storage and boost efficiency.

 5. The Splurge - Focuses on enhancing Ethereum's user experience, security and scalability, and also foresees defences against probable future quantum computing threats. Or basically - fixing everything else.

By preliminary expectations, these steps should be completed and the changes should roll out by 2026.

About Sharding

Sharding is a concept crafted back in 2015 with the aim to solve the scaling issue. The idea was to split the protocol into separate smaller chains, or shards, so that they can simultaneously process their transactions in parallel to each other, reducing the computational burden on the protocol and increasing the speed and efficiency on the Ethereum network. This would drastically assist with lowering high gas fees happening due to congested network traffic. 

Sharding could also assist with the decentralization aspect of the protocol. This mechanism allows for a greater number of nodes to take part and process the transactions, which on its end increases decentralization and therefore - security. 

Despite its benefits and the long-waited improvements that it can bring to the Ethereum blockchain, sharding faced multiple difficulties and thus was never able to be rolled out. Below are listed some of the reasons:

 1. Technical complexity - implementing this technology on a decentralized network has proven to be quite complex. This type of environment makes it difficult to synchronize and secure the processing of transactions in parallel operating shards.

 2. Security concerns - Sharding can make blockchain protocols vulnerable to various attacks, such as “cross-sharding attacks” for which separate security protocols have to be set up. 

 3. PoS Transition dependency - In order for sharding to work, the Ethereum network had to first transition from PoW to PoS, which the Beacon chain allowed to happen.

 4. Compatibility with L2 solutions - An alignment with L2 scaling solutions, like rollups, was needed in order to successfully apply sharding as a mechanism.

ETH 3.0 reactions in the community

The Ethereum community is currently split 50/50 on the topic of Ethereum 3.0. A lot of speculation has surfaced about what exactly is coming next.

As an example, a rumor is going around that this week there would be an ETH 3.0 announcement entailing a “second merge into a new consensus targeting 1-second block times” and a native zero-knowledge Ethereum Virtual Machine (zkEVM), which has the community in amazement of the possibility of eliminating gas fees and the need for L2 rollups.

Others in the community have been negatively scrutinizing all recent news about ETH 3.0. There seems to be a mixture of excitement, cautious optimism, and some skepticism. Since the previous major update to Ethereum 2.0 was seen as a great leap forwards, the scalability issues remained, which makes some of the devoted Ethereum enthusiasts doubtful regarding Ethereum 3.0 and “what could go wrong” there. 

The possibilities and solutions presented by Ethereum 3.0 continue to captivate attention, engaging both skeptics and devoted supporters alike. As the saying goes, we must wait and see how things unfold.

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