In November 2020, the Eth2 launch process started. The network's transition to proof-of-stake is predicted to turn ETH into a deflationary asset.
Vitalik Buterin, the co-founder of Ethereum, has laid out his perception for a "plausible roadmap" for Eth2, describing a future in which the largest smart-contract platform may enhance its scale while fulfilling high requirements for trustlessness and censorship resistance.
Buterin proposed a thought experiment on how the average large blockchain characterised by very high block frequency, huge block size, and thousands of transactions per second may still be deemed adequately trustless and censorship-resistant in a Monday post titled "Endgame." The clear trade-off for this level of flexibility is the centralised production of blocks. Buterin's ideas, as stated in the blog post, do not deal with the issue of centralization, but they do provide a road map for execution.
Buterin intended “a second tier of staking, with low resource requirements,” to carry out distributed block validation; “introduce either fraud-proof or ZK-SNARKS to let users directly (and cheaply) check block validity” directly; and “introduce data availability sampling to let users check block availability [and] add secondary transaction channels to prevent censorship.”
With the recent updates, “We get a chain where block production is still centralized, but block validation is trustless and highly decentralized, and specialized anti-censorship magic prevents the block producers from censoring,” Buterin stated.
Buterin stated that despite the implementation of so-called "rollups," which are layer-two solutions that process transactions outside of the main Ethereum chain, block generation will remain centralised. (Even so, in October 2020, Buterin proposed a rollup-centric roadmap for Ethereum.)
“No single rollup succeeds at holding anywhere close to the majority of Ethereum activity. Instead, they all top out at a few hundred transactions per second,” he explained. Although rollups seem to have the potential to contribute to distributed block production, decentralisation may not be sustainable due to the possibility of cross-domain maximum exhaustible revenue, or MEV. MEV, as the name suggests, refers to the maximum amount of value that may be received through block production over and above standard block incentives and gas fees.
Despite the network's approach to scalability, the Ethereum co-founder decided that there is a strong possibility that block production would become centralised. According to him, the advantage of Ethereum's rollup-centric roadmap is that it is accessible to all futures.
Since November 2020, when the protocol initially started its long journey to proof-of-stake, excitement has been growing around it. The long-awaited London hard fork, which puts ETH on track to become a deflationary asset, took place in August of this year. EIP-1559, which intends to improve the network's fee market, was introduced through the hard fork. According to data, approximately 1 million ETH has already been burned after the implementation of EIP-1559.