Vitalik Buterin Discusses Decentralization Timing for Rollup-Based Platforms
Ethereum co-founder Vitalik Buterin has shared insights on the timing for rollup-based scalability solutions to adopt a decentralized approach, emphasizing that the immediate transition to decentralization is not advisable. In a recent post, Buterin noted that the appropriate timing for such a shift hinges on the reliability of the proof system’s failure probability in relation to the risks posed by centralization.
Importance of System Maturity in Security
Buterin’s comments were prompted by a discussion initiated by Daniel Wang, the founder and CEO of the decentralized exchange Loopring. Wang highlighted that the robustness of a system is crucial for its security, stating that not all software is equally resilient. He explained that a rollup can reach stage two but still be based on newly developed code that hasn’t undergone rigorous testing in real-world scenarios. The development of rollups is categorized into three stages: stage zero, stage one, and stage two, with stage two representing a fully decentralized and trustless environment.
Vulnerability of Cryptocurrency Systems
Cryptocurrency systems managing substantial amounts of assets are increasingly at risk from profit-driven malicious actors globally. Even projects lacking bug bounty programs that reward users for identifying vulnerabilities are scrutinized intensely, often leading to greater financial losses due to their flaws. The threat landscape is further complicated by the emergence of state-sponsored actors, such as the Lazarus Group, which has been linked to numerous significant hacks in the cryptocurrency sector, including the notorious $1.4 billion hack of Bybit.
Introducing the ‘BattleTested’ Metric
Wang proposed a new metric for assessing the durability of code that has withstood attacks from highly skilled hackers: the “BattleTested” badge. This designation would be granted to rollups that successfully secured at least $100 million in assets over a six-month period, with a minimum of $50 million held in Ether (ETH) and a major stablecoin. However, this badge would be revoked with each update, as new code must also withstand potential attacks to earn it. Buterin acknowledged this perspective, stating that while stage two is important for security, the quality of the underlying proof system also plays a critical role.
Evaluating Risks Before Decentralization
According to Dominick John, an analyst at Kronos Research, rollup teams must carefully assess associated risks, such as shared custody vulnerabilities or geopolitical issues that could undermine the security of multisig councils before transitioning from stage one to stage two. He noted that these risks often go unnoticed until the value locked exceeds $100 million. John emphasized that the decision to decentralize should not be based solely on theoretical assessments of the proof system but rather on its performance under economic pressures, which must prove it to be more reliable than the risks of coordinated failures among council members.
When is the Right Time to Decentralize?
Buterin elaborated that the optimal moment for a protocol to decentralize is when its on-chain proof system demonstrates sufficient safety, such that the centralized components become a greater risk for failure or collusion. This is crucial because premature decentralization could inadvertently decrease the system’s overall security if it is not yet robust enough.
The Risks of Premature Decentralization
Mike Tiutin, the chief technology officer at decentralized compliance protocol PureFi, cautioned that decentralizing too early could expose users to vulnerabilities. John from Kronos Research reiterated that decentralization is not a sprint but a long-term responsibility that the entire ecosystem shares. He warned that hurrying to stage two could prioritize ideology over safety, leading to increased risks. In stage one, councils can intervene during issues, but in stage two, a single bug could result in catastrophic losses without the option for recovery.
Gradual Decentralization as a Strategic Approach
Tomas Fanta, a principal at the crypto venture capital firm Heartcore, praised Buterin’s approach of gradual decentralization, calling it a refreshing perspective. He explained that rollups are still in their developmental phase, and their individual components have not yet been fully battle-tested in real-world conditions. Hastening their decentralization could lead to operational paralysis. Fanta noted that decentralization is a benefit that should come with maturity, while it could impose significant costs on the system at earlier stages.
Concerns Over Custodial Control
While experts agree on the risks of moving toward decentralization too quickly, some warn against remaining overly centralized. Arthur Breitman, co-founder of the Tezos blockchain, pointed out that many prominent Ethereum layer-2 solutions are essentially custodial, with central entities controlling core logic. This setup raises concerns about asset integrity, as reliance on their immunity to collusion is precarious and could lead to correlated failures.
Trade-offs in Decentralization Speed
Yishay Harel, CEO and co-founder of rollup-centric blockchain Dymension, noted that Ethereum was not initially designed to accommodate rollup settlements, which creates significant trade-offs. He explained that moving too rapidly towards decentralization could jeopardize critical systems, while a slow approach could result in retaining a custodial structure governed by multisig and upgrade keys. Harel agreed with Buterin’s strategy of progressively staging decentralization as systems mature but also indicated a concern regarding the original architecture’s suitability for independent execution environments.
