Ethereum creator Vitalik Buterin quietly published an intriguing technical overview last month, describing the process of “enshrining” certain features in the blockchain’s core protocol or moving certain layer two functions to layer one.
Interestingly, similar conversations have been occurring in the Bitcoin community where Paul Sztorc, CEO and founder of Bitcoin infrastructure firm LayerTwo Labs, has been vigorously arguing for the viability of drivechains – a type of sidechain or secondary blockchain that interacts with the primary Bitcoin network.
These technical conversations have been largely overshadowed by the high-profile trial of Sam Bankman-Fried, the disgraced former CEO and founder of the now-bankrupt crypto exchange FTX.
Ethereum’s protocol enshrinement and Bitcoin’s potential implementation of drivechains (which won’t be covered below, but a brief synopsis can be found here) will likely have far more impact on the industry in the long run than Bankman-Fried’s trial, regardless of how much attention the latter receives in the short term.
If Bankman-Fried is convicted, it will certainly reverberate for years to come. But a fundamental change in the mechanics of the world’s top two blockchains will arguably be more consequential.
Protocol enshrinement – a story of trade-offs
There are no solutions in crypto, only trade-offs, and few concepts embody that aphorism better than enshrinement.
According to Buterin, enshrinement is simply the process of incorporating certain key features that are part of the broader Ethereum infrastructure, directly into the core protocol. Buterin says this minimizes the impact of potential bugs and mitigates validator centralization, among other things.
“From the start of the Ethereum project, there was a strong philosophy of trying to make the core Ethereum as simple as possible…by building protocols on top,” Buterin writes. “More recently, however, there has been some cautious interest in being willing to enshrine more of these features into the core Ethereum protocol.”
Some of those features include account abstraction, which enables smart contract wallets that support critical functions like account freezing and recovery, and zero-knowledge Ethereum Virtual Machines (zkEVMs) that speed up transaction processing in a secure and verifiable way by leveraging cutting-edge cryptography. Enshrining account abstraction and zkEVMs would provide more effective ways of dealing with bugs, according to Buterin.
“If some set of pieces of code are used by all users, or a very wide class of users, then it often makes more sense for the blockchain community to take on itself the responsibility to hard-fork, to fix any bugs that arise,” writes Buterin.
He also describes how enshrining liquid staking could prevent validator centralization. Liquid staking involves locking up or staking cryptocurrency on a proof-of-stake blockchain and receiving corresponding tokens from a provider such as Lido. The tokens can be subsequently used for decentralized finance (DeFi) purposes.
“If a single such staking token dominates, that leads to a single, potentially attackable governance gadget controlling a very large portion of all Ethereum validators,” Buterin explains. “To the credit of protocols like Lido, they have implemented safeguards against this, but one layer of defense may not be enough.”
Gradual protocol evolution
Despite these promises of lower bug risk and decreased probability of centralization, enshrinement’s glaring drawback is how it could result in an increasingly complex protocol that eventually becomes overextended and unwieldy.
“What features should be brought into the protocol and what features should be left to other layers of the ecosystem is a complicated trade-off,” Buterin explains. “We should expect the trade-off to continue to evolve over time.”