The Road to Ethereum 2.0

Scenarios for xDai during the multi-year transition

Ethereum 2.0 is rolling out in several phases over the next several years. There are still many questions around exact plans, details and timing. In the meantime, the xDai team continues to support Ethereum 1.0 interoperability while monitoring the transition and exploring possible future scenarios over the coming years.

We are following all Ethereum mainnet updates / forks (Berlin, London - EIP1559, Shanghai) and will upgrade xDai accordingly as these forks are successfully implemented. 🚅 Latest All Core Devs updates here.

During the 2.0 transition, we will see which outcome(s) support the best use-case for xDai stable chain projects and users. As a community member, feel free to voice your opinion about future directions for xDai and STAKE as well in our forum. Below are several possible scenarios.

Please note that all of these approaches are possibilities for future directions. We do not have a 🔮 and new opportunities may present themselves as the space evolves.

1) xDai incorporated into Ethereum 2.0 as a roll-up or shard chain

The shard chain implementation in Ethereum 2.0 is still up for discussion. There are plans for 64 shard chains in Eth 2.0. How many of these will be state-and-execution type chains (full EVM chains capable of running smart contracts) is yet to be determined. There may be 1 state-and-execution type shard chain (Ethereum 1.0) with other shard chains providing additional data availability, 4-8 shard chains with full state and execution, or 64 state and execution chains (1). The implementation may also be influenced by stateless transaction advancements being developed by the Ethereum team. Depending on which shard-chain strategy is implemented, it is possible that xDai could be incorporated as a shard chain.

More recent discussions have centered on roll-ups in Ethereum 2.0 (2). In this more likely implementation, xDai could be connected to Ethereum in a roll-up-like capacity, continuing to provide stable, low-cost transactions while taking advantage of Eth2.0 base-layer security.

In either case, the STAKE token would continue to provide value as a source of transactional prioritization. For example, in a roll-up scenario, PoS with STAKE could continue whereby users deposit STAKE into the roll-up contract and the amount of STAKE staked along with a random number determines who submits batched transactions (along with deterrents/punishment for fraudulent behavior). There is also an opportunity for MEV auctions where holders could bid amounts of STAKE with the highest bidder earning the right to submit a batch.

1) https://blog.ethereum.org/2021/01/20/the-state-of-eth2-january-2021/ 2) https://ethereum-magicians.org/t/a-rollup-centric-ethereum-roadmap/4698

2) L2 EVM Chain Consortium

We cannot predict when Ethereum 2.0 will be fully operational or what exact form it will take. In the meantime, L2 side chains including xDai, Polygon, BSC and others continue to gain traction, users, and projects. As the available tooling expands and becomes easier to use, many users may decide to stay within the chain architecture they are currently using.

The ability for L2 EVM chains to provide a complete user experience with all the tools users expect, faster transactions and lower fees make a case for this ecosystem to continue to grow. For example, roll-ups in the near term will likely be considerably more expensive than using xDai.

Each chain has its own set of advantages and challenges, and interoperability mechanisms (cross-chain bridges, state channels etc) allow users and projects to move seamlessly across these different chains based on their desired usage and security tolerance.

This can continue when Eth 2.0 is realized; L2 chains can maintain their own consensus processes and implementations while communicating with one another as well as the Eth 1.0 shard and other L1 chains. While base-layer security remains the responsibility of each chain - in xDai this means POSDAO with STAKE - users can move funds to any chain they see fit, depending on the tooling and available features they want (ie users and projects may continue to leverage the xDai stable chain for predictable payments, streaming payments, and native applications).

3) Eth 1.0 Legacy Chain

Ethereum 1.0 is not going away with Ethereum 2.0. While the consensus methodology will change from Proof-of-Work to Proof-of-Stake, the user layer will remain the same during the transition. Ethereum 1.0 is not being deprecated, just incorporated into a much larger architecture.

Regardless of the changes or improvements, a percentage of users will want to remain with the previous system. It is not unusual for legacy systems to remain for many years (ie COBOL 🙂 ) to support infrastructure running their software without issue. Ethereum Classic will continue to provide an EVM-based PoW chain. There is a possibility xDai could also continue in 1.0 mode, providing a stable chain for projects and users who do not want to move to Ethereum 2.0. There will be many projects who decide to stay with Eth 1.0 infrastructure moving forward, and xDai may be well suited to support them.

Summary

The Ethereum 2.0 roadmap is changing and evolving, however it will likely not be fully operational for several years. During this time we continue to support and innovate as well as take a wait-and-see approach. Depending on how projects, chains and the community decide to navigate this transition, we will position xDai to best serve our users, projects and STAKE holders in the years to come.