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Key Takeaways

In a recentpost, Vitalik Buterin, co-founder ofEthereum, explains the differences between Layer 2 solutions and execution sharding for scaling Ethereum.

While both methods use ZK-SNARKs for transaction verification, there are certain trade-offs while using each of the scaling methods. Buterins commentary also comes at a time when the dollars locked in Ethereum L2s gained 16% in 7 days.

In simple terms, while Layer 2 solutions and execution sharding both aim to scaleEthereumby processing more transactions, they differ in their approach. Layer 2s add extra layers on top of the blockchain, whereas sharding splits the blockchain itself into smaller, more manageable parts.

Buterin explains that in terms of technology used, both methods utilize ZK-SNARKs for transaction verification and DAS for data checks. However, in Layer 2 solutions, these technologies are implemented as smart contract codes, which are additional programs running on the blockchain. In execution sharding, they are integrated directly into the core of the blockchain protocol.

Therefore, Layer 2 solutions act like additional highways to handle more traffic without congesting the main road, which is the main blockchain. On the other hand, execution sharding divides theEthereumblockchain intomultiple lanes on the same highway, each managing a part of the overall traffic.

As per data byL2BEAT,the total value locked (TVL) in various Layer 2 solutions for Ethereum stands close to $45.5b. Arbitrum One leads the list at $18.88b at press time. Other notable Layer 2s include OP Mainnet at $7.57b and Base at $6.54b. The data reflects the percentage change in TVL over 7 days until May 23, is positive 16%.

The commentary from Buterin comes at a time when the dollars locked in L2s are near an all-time high.

Buterin notes one key difference is how the two methods deal with bugs. In Layer 2 systems, bugs might cause users to lose their coins. Contrarily, in sharded systems, bugs could lead to broader issues like consensus failures, where the network cant agree on the state of the blockchain. However, as technology improves, the impact of bugs is expected to decrease.

Security is another area where the two methods differ.EthereumLayer 1 offers strong security guarantees but at a higher cost. Layer 2 solutions provide cheaper transactions, which is beneficial for applications that dont need the same level of security, like social media or gaming. Buterin explains that different types of Layer 2 solutions can offer various levels of data availability and security, allowing for flexibility based on the applications needs.

The Ethereum co-founder writes, Its ok if someone can pay a million dollars to revert a record of them losing a chess game, or make one of your twitter posts look like it was published three days after it actually was.

Buterin also notes another issue is in transferring assets between Layer 2 solutions. The developer predicts that all rollups might become more efficient and secure in the future, but for now, the mix of different rollup technologies makes asset transfers complex.

According to him, transaction speed is another factor of concern. He explains, Ethereumhas blocks every 12 seconds, and is unwilling to go much faster because that would overly centralize the network. Many L2s, however, are exploring block times of a few hundred milliseconds.

Buterin underlines that Layer 2 solutions exploring faster processing times rely on preconfirmation mechanisms.

Vitalik Buterin explains that while it is possible to implement faster transaction confirmations and varying security levels directly on the mainEthereumblockchain, doing so would make the system overly complex and could overload the network. According to him, the approach also risks centralizing the network and requiring more intensive governance. Therefore, by using Layer 2 solutions, Ethereum can manage these trade-offs.

The co-founder also touches on the organizational and cultural benefits of Layer 2 solutions. By allowing developers to create independent sub-ecosystems with their own rules, Layer 2 fosters innovation and creativity.

However, this independence also brings coordination challenges, according to Buterin. Ensuring thatEthereummaintains a cohesive ecosystem despite its branching into multiple Layer 2 solutions requires better infrastructure and collaboration.

He notes, The best I can say is that the ecosystem needs to more fully recognize that cross-L2 infrastructure is a type of Ethereum infrastructure, alongside L1 clients, dev tools, and programming languages, and should be valorized and funded as such.

Vitalik Buterin concludes that while both Layer 2 solutions and execution sharding aim to enhance Ethereums scalability, they come with different trade-offs.

Layer 2 solutions provide flexibility and foster innovation by allowing developers to create independent sub-ecosystems.

However, they can pose coordination challenges for theEthereum network. Despite the complexities and potential risks of centralization, using Layer 2 solutions can help manage these trade-offs more effectively than incorporating all enhancements directly into the main blockchain.

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Vitalik Buterin Weighs in on Difference Between Layer 2s and Execution Sharding - CCN.com

Arkham Intelligence data reveals that Vitalik Buterin, the Ethereum co-founder, transferred 80 ETH to the privacy-focused Railgun today. At todays price, Buterins transfer is valued at roughly $300,000.

According to on-chain data, this transfer is a significant example of Buterins ongoing use of Railgun over the past six months.

Buterins regular transfers to Railgun highlight his view that privacy is a fundamental right. Responding to the attention his actions often receive, Buterin stated that privacy is normal. He stressed that although privacy-focused protocols can be misused, tools like Railgun are built to protect legitimate users.

Railgun uses the privacy pools protocol which makes it much harder for bad actors to join the pool without compromising users privacy, he said.

Read more: What is Railgun? A Guide to the EVM Privacy Protocol

In a recent BeInCrypto interview, Alan Scott, a researcher at Railgun, explained that Railgun uses zero-knowledge proofs (zk-SNARKs). This aims to ensure user privacy in DeFi applications. Railguns features include Private Proofs of Innocence, allowing users to show they have not interacted with malicious actors on-chain.

This technology ensures users do not share a system with nefarious addresses. Additionally, Railgun includes auditability features, such as a view-only private key, enabling users to reveal transaction graphs to third parties.

Despite its robust technologies, Railgun has allegedly been used by the Lazarus Group, a hacker group reportedly linked to the North Korean government. Eliptics January 2023 report indicates that the Lazarus Group switched to Railgun. They did so after the US Treasury sanctioned crypto mixer Tornado Cash, their previous tool for money laundering.

The group used Tornado Cash to obscure their June 2022 theft of over $100 million from the Harmony Horizon Bridge. However, the Federal Bureau of Investigation (FBI) confirmed that the Lazarus Group used Railgun to launder over $60 million of Ethereum from that theft.

Read more: Top 7 Tornado Cash Alternatives in 2024

Vitaliks endorsement and the Lazarus Groups exploitation of Railgun highlight the ongoing conflict between individual privacy and preventing criminal activity within the crypto industry. This adds an important data point to the broader discussion about blockchain regulation, anonymity protocols, and their risks to the financial system.

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In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that ourTerms and Conditions,Privacy Policy, andDisclaimershave been updated.

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Vitalik Buterin Moves $300,000 in Ethereum to Railgun - BeInCrypto

Key Takeaways

Ethereum co-founder Vitalik Buterin recently transferred 80 ETH to Railgun, a privacy tool often likened to a crypto mixer.The May 22 transaction highlights Buterins ongoing use of Railgun for privacy purposes. Despite its privacy enhancements, Railgun has facedcriticismfor potential misuse.

The recent sentencing of Tornado Cash developer Alexey Pertsev for money laundering has sparked discussions about the legal implications of using such tools.To gain insights,CCN consulted David Lesperance, an international crypto and tax advisor.

Ethereum co-founder Vitalik Buterin recently transferred 80 ETH, valued at approximately $300,000, to the privacy mixerRailgun. Arkham Intelligencenotedthe transaction on May 22.

CCN previouslycited reportswhich notedthat Buterinhasbeen regularly transferring small amounts of ETH to Railgun while advocating to protect privacy.

While Railgun claims to enhance privacyunlikesanctioned mixers, it has faced criticism for potential misuse by hackers. Can Vitalik Buterin face legal concernsafterTornado Cashdeveloper Alexey Pertsevis facingjailtime?

CCN spoke to David Lesperance, an international crypto and tax advisor, to understand the implications of these transfers.

Lesperance highlighted that crypto mixers, like Tornado Cash,are under scrutiny becausethey can be usedforbothlegitimate andillicit purposes, such as tax evasion or funding terrorism.However, since Buterin is not a US taxpayer, the US lacks jurisdiction over his use of such tools, the tax advisor explained. He emphasized that while US regulations might restrict American users, international enforcement remains complex and inconsistent.

Thisparticulargentleman is not an American; hes a Canadian and a Montenegrin for tax purposes. They dont have jurisdiction over him as a user, just as they wouldnt who was an Indian or Emirati or an Aussie or Kiwi, he added.

David elaborated on the legal framework surroundingthe use ofcrypto mixers, comparing it tocash.

Lesperance says, Cashcan be usedforbothlegitimate and nefarious reasons. And so I would say it would be tough to ban as opposed to forcing by hitting the choke points, whether thats in Tether or whether that is the exchanges.

Lesperance also noted that international regulations would need to be more coordinated for effective enforcement againstthe use ofcrypto mixers.

The advisor added, Think of Tornado Cash asa tool,a tool thatcan be usedfor legitimate purposes, a tool thatcan be usedfor illegitimate purposes.Those purposes could include evasionandthose purposes could include funding terrorism groups or sanctioned groups.

In the case ofTornado Cash, developer Alexey Pertsevwas beenfound guilty of money laundering by a Dutch court.

Interestingly, the Dutch court confirmed and concluded that this is a tool, Lesperance explained.

Crypto researcher Molly White advocates for crypto privacy despitea rise in criminal activities.She argues that while Tornado Cash hasbeen usedfor criminal activities, its primary function as a privacy tool should notbe overlooked.

The crypto researcher emphasizes the importance of financialprivacy, comparing it to the need for encryption in communications. White cautions against the potential negative consequences of criminalizing the development of privacy-enhancingtechnologies,while calling for a balanced approach to privacy and regulation.

David Lesperance explains that although Vitalik Buterins use of Railgun is unlikely to result in legal troubles due to his non-US taxpayer status, the broader issue of regulating crypto mixers remains complex.

Lesperance emphasizes the need for coordinated international regulations to address the dual-use nature of these tools.

Meanwhile, advocates in the crypto field have been noting the importance of privacy in financial transactions. But, the criminalization of privacy-enhancing technologies remains a matter of debate.

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Vitalik Buterin Transfers 80 ETH to Railgun: Could This Raise Legal Concerns? - CCN.com

Key Takeaways

Vitalik Buterin, co-founder ofEthereum, remainspositiveabout the networksfuture,despite acknowledging significant concerns.Ethereum faces criticisms about potential centralization and the development direction that impacts the protocol integrity.

In the meantime, the approval of anEthereumETF hangs in the balanceandthe classification of Ethereumas a security has ignited debates.

Ethereum co-founder Vitalik Buterin believes that key improvements likePeerDASwhere data is shared between validators, the Verkle tree transition for verification, and decentralized history storage (EIP 4444) to reduce reliance on one node are speeding up development on the network.

He notes, From my own perspective, it feels like the pace of Ethereum development, and our capacity to ship large and important features that meaningfully improve the experience for node operators and (L1 and L2) users, is increasing.

However, Buterin also acknowledges concerns raised by core developer Peter Szilagyi about thedirection of development.

Szilagyi worries that constant modifications to the protocol rules might lead to Ethereumbeing capturedby traditional finance (TradFi) interests. He has also criticized the trend of outsourcing problem-solving to external entities, which he feels compromises the protocols integrity.

In addition, Szilagyi raises concerns aboutEthereums development trends that he believes are moving away from its decentralized and open principles. He notes that MEV has become problematic and benefits proprietary builders over local producers; liquid staking concentrates power; increasing hardware requirements may exclude individual node operators; and certain features risk centralizing Ethereum, making it resemble traditional banking systems.

In response, Buterin said, I also do not think that the situation is anywhere near as hopeless as Peters tweets imply;

The debate arises at a critical time, as the approval of an Ethereum ETF remains uncertain, and the classification ofEthereum asa security could spark legislative battles.

CCN previously reported that the Ethereum Foundation is under scrutiny with a main focus on the Ethereum networks operations and transactions rather than the foundation itself.

In the blog post, Buterin suggests a two-pronged approach to address the issues raised by Peter regarding Miner Extractable Value (MEV) and builder dependence. First, he advocates for MEV minimization by promoting MEV-free alternatives and using in-protocol techniques like encrypted mempools to reduce the information available to block producers.

To address concerns about liquid staking centralizing power, the blog post emphasizes developing a robust solo staking ecosystem.Heacknowledges challenges like the 32 ETH minimum requirement and technical difficulties of running a validator node. Solutions include Verkle trees and EIP-4444, which reduceharddisk requirements and simplify node setup.

Additionally, Buterin proposes leveraging EIP-4444 and Verkle trees to reduce node storage to address the issue of high hardware requirements for running Ethereum nodes.

However, theEthereum co-founderagrees that the trend of relying on large actors for node responsibilities could lead to centralization. He highlights progress in Ethereum protocol proposals that aim for true decentralization, such as stateless nodes, MEV mitigations, and single-slot finality.

The blog also advocates for enhancing light client technology, decentralized cross-L2 bridges, and improving log scanning through decentralized protocols.

Buterin emphasizes that Ethereum should maintain its uniqueproperties of decentralization and security, even as it scales, rather than following projectsthat prioritizespeed overdecentralization.

In a separate post, the Ethereum co-founder suggests creating a decentralized protocol foreasilymoving assets between L2s, integrated into wallet interfaces. He notes that while L2s are better than before, they dont yet feel like a unified Ethereum experience.

Buterin proposes focusing on cross-L2 standards forcommontasks like token transfers and smart contract updates to make them as easy as on the main Ethereum chain (L1). He also highlights the need forimprovements inL2 security, reliability, and proof systems to match L1 standards.

Vitalik Buterin addresses the Ethereum developers centralization concerns with various improvement proposals.Ethereumisreportedly focusingon MEV minimization, supporting solo staking, and lowering hardware requirements to improve efficiency.

In addition, Ethereum is moving towards decentralized solutions like stateless nodes and enhanced light client technology with improvement proposals. While Buterin insists that Ethereum must prioritize decentralization, it is in regulatory limbo.

While Ethereum must focus on technological development, itwill have to navigate the legislative hurdles on the sidelines. Especially since the SECs investigation into the Ethereum network raises questions about its classification as a security, potentially impacting its future and its position in the broader crypto market.

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Vitalik Buterin Optimistic About Ethereum Future, Says Things "Not Hopeless" But Will SEC Change His Mind? - CCN.com

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