Vitalik New Article Review: Getting Crypto Out of the Degen Dilemma

Author: Haotian

Vitalik’s new article seems to reaffirm Ethereum’s Cypherpunk spirit (Decentralization, Censorship Resistance, Auditability, Tool Components, Open Cooperation), but it is actually its concern and dissatisfaction with the current ecosystem that is too financialized (Degen).

How to get out of the pure Degen dilemma?@VitalikButerin I put forward five directions for positive development, and I would like to briefly add some personal comments:

1） Rollupsarestarting to actually exist.

Comments: In the past year, the layer2 track has presented a scene of market competition and prosperity, layer2 war is fiercely fighting, for Ethereum, the more Rollups chain, the more drainage + empowerment. However, Ethereum layer2 is gradually seizing the market by various RaaS solutions + DA solutions and modular VM solutions, and the layer2 market is escaping the control of Ethereum’s orthodox spirit.

For Ethereum, this is indeed not what Vitalik wants to see, but for the crypto industry, the endgame of the layer2 market will inevitably move towards the two major factions of pro-Ethereum and off-Ethereum. In the end, which layer 2 can come out will not be constrained by political legitimacy, but will depend on whether it can promote the occurrence of mass adoption.

2） Following a temporary lull after the regulatory crackdowns on Tornado Cash,second-generation privacy solutionssuch asRailwayandNocturneare seeing the (moon) light.

Comment: Privacy Centric Privacy transactions are a track that sounds like a necessity but is slow to land. Due to the openness and transparency of the DEX environment, the MEV space, and the exposure of trading intent, most market makers and individual traders tend to focus on CEXs.

Whether DEXs can be on par with CEXs in the future depends on the construction of Privacy infra. The first generation of privacy transaction solutions, Tornado through the contract layer split funds to confuse assets has been widely used for illegal Money Laundering, which has been frequently sanctioned by regulators; the second generation of privacy transaction solutions are through the middle privacy layer, whether it is Nocturne’s Teller and handler or Railway’s Relayer have undertaken the From Address role of private transactions, and the user’s real transaction intentions will be hidden through the middle layer.

Specific implementation technologies usually include ZK-Snarks, Paymaster for AA account abstraction, and multi-signature management in the MPC trusted environment. Users only need to wrap assets into private assets, and then initiate transaction intentions to the middle layer, and the middle layer Pool will complete a series of Decentralized Finance interactions on their behalf. The more assets precipitated in this middle layer, the larger the number of users, the better the privacy effect, and the key is that there can be compliance solutions in parallel, which is easier to become the mainstream in the future. (Find an opportunity to analyze in detail)

3） Account abstractionisstarting to take off.

Comment: The market has desensitized to account abstraction because it is too basic, and the value of account abstraction can only be revealed when it reaches the application layer outbreak stage. It should be said that account abstraction is like a patch, giving Ethereum the confidence not to be siphoned off liquidity by high-performance public chains such as Solana.

Moreover, at the moment, the account abstraction track is already very prosperous, but most of the solutions are biased towards the underlying Infra construction, which has not yet been verified by the market, and everyone feels irrelevant. But I think that whether Ethereum layer2 can really burst out high-frequency applications and become the entrance to incremental users, account abstraction is a must. When playing layer 2, don’t forget to choose some account abstraction underlying applications.

4） Light clients, forgotten for a long time, arestarting to actually exist.

Comment: Light clients are more important after Ethereum to POS, because it can extend the verification capabilities of Ethereum Validators and extend Ethereum’s consensus to other chains. For example, if you make a set of third-party DA solutions, you can use the restaking mode to let some of the validators of the Ethereum participate in the maintenance of the SidechainConsensus, which will be more convincing than the Consensus built by pure third-party validators, and for example, if you make a set of Decentralization Sequencer solutions, you can also use restaking to let the Ethereum validators participate in the echelon of Sidechain Sequencer.

The premise of all this assumption is based on the light client solution, and the familiar Eigenlayer is based on the light client to realize the expansion of Ethereum’s validators capabilities. From a strategic point of view, this solution is a powerful weapon for Ethereum to defend itself against third-party DA intrusion and maintain its Ethereum legitimacy.

5） Zero knowledge proofs, a technology which we thought was decades away, are now here, areincreasingly developer-friendly, and are on the cusp of being usable for consumer applications.

Comments: Zero-knowledge proofs were once popular and expected, and now they are embarrassed and disappointed. Because Zero-Knowledge Proof solves privacy and scaling problems without immediate results. For example, OP-Rollup and ZK-Rollup compete to the end, we all know that ZK is more awesome, but it can’t hide the fact that OP is more popular than ZK.

In my opinion, ZK technology is more suitable for the future, but also beyond the pure financial narrative, at the moment everyone sighs at ZK emotion can be understood, but in the real application era, ZK will become a necessary existence like Blockchain. (Looks like Vitalik said that too.)