What to wait from Ethereum in 2023

Key points: 

• Stacked ETH and rewards for staking will be available to withdraw in March of 2023. This will be the most pressing problem for Ethereum developers to solve.
• Proto-danksharding is going to be the most exciting thing developers will do in 2023 as it has the potential to attract millions of users and bring true scalability to Ethereum.
• Currently, 65% of the blocks that entered the Ethereum blockchain in the past 24 hours are censoring Tornado Cash transactions, and community members are attempting to reverse the process of increasing censorship.
• Ethereum will bring together developers, market participants, policymakers, and other community members at various global events where people can collaborate on new ideas.

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Withdrawals from staked Ether imminent

This will be the most pressing problem for Ethereum developers to solve.

When Ethereum switched its consensus mechanism to proof-of-stake (PoS) following the September merger, the network began using validators rather than miners to approve blocks and add them to the Ethereum blockchain. Before the merger, validators began staking 32 ether (ETH) on the PoS beacon chain to participate in the block validation process.

But validators know before joining the network that their staked ETH and any accrued rewards will remain locked until Ethereum’s next upgrade, Shanghai, now scheduled for March.

Those who accumulated rewards, some of them back in December 2020 when the Beacon Chain goes live, can finally cash out.

Marius Van Der Wijden, a software developer at the Ethereum Foundation, told: "Withdrawals are basically done." Van Der Wijden added that all that remains to be done is to test the code to enable withdrawals, which "should be mostly available in February/March."

Proto-danksharding this fall maybe?

Another problem that Ethereum developers hope to solve is "proto-danksharding", which is derived from "sharding".

Sharding is a method of splitting the network into multiple chains or "shards" to make the blockchain more scalable. The developers liken sharding to adding new lanes to a highway; more cars can use the highway and (ideally) travel faster on it because there is less traffic.

The same goes for Ethereum transactions: sharding increases the amount of network activity the blockchain can handle, reduces gas fees, and enables faster transaction speeds.

Danksharding uses the same principle of dividing the network into shards, but instead of providing more space for transactions, it provides more space for data "blobs", allowing Ethereum to process more data.

An ambitious effort that Ethereum developers agreed would be too ambitious if it went live in March with staked ETH withdrawals. Since their top priority is getting players to withdraw their ETH as quickly as possible, the developers agreed to push forward with the proto-danksharding upgrade planned for the fall.

Parithosh Jayanthi, a DevOps engineer at the Ethereum Foundation, told that he believes [proto-]danksharding “is going to be the most exciting thing developers will do in 2023.” Jayanthi also added that proto-thanksharding “has the potential to attract millions of users and bring true scalability to Ethereum."

Dealing with censorship issues and centralization of Ethereum

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) approved the Tornado Cash Ethereum mixer program in August 2022, and since then, Ethereum developers have had to grapple with what that means. Some argue that validators not subject to U.S. jurisdiction do not need to comply with sanctions. Others are confused about what types of blockchain activity are allowed under OFAC rules.

Currently, 65% of the blocks that entered the Ethereum blockchain in the past 24 hours are censoring Tornado Cash transactions, and community members are attempting to reverse the process of increasing censorship.

As of now, members of the Ethereum ecosystem view OFAC compliance in different ways. Some interpreted the sanctions as preventing them from adding Tornado Cash transactions to the blockchain. Others see such actions as a form of censorship. This sparked a debate within the Ethereum community about how to reconcile rules and principles.

“I think the ecosystem needs to focus more on censorship resistance and customer diversity next year,” Jayanthi told. “None of these are rigorously addressed in next year’s protocol roadmap, so I hope the community layer takes responsibility until we can properly address them in the protocol.”

The censorship issue also raised some concerns about centralization, as most validators opted to add transactions to the blockchain to filter out Tornado Cash.

“We’ve been trying to create an Ethereum protocol that can be highly decentralized. But there’s centralized power everywhere, and we need to be very vigilant about addressing these issues,” said Ben Edgington, chief product lead at Teku, an Ethereum client (a type of software) developed by ConsenSys, a company focused on the Ethereum blockchain. “We can’t force people to decentralize Ethereum, but if they don’t, it becomes worthless.”

More exciting events like Devcon and ETHGlobal meetups

Finally, Ethereum will bring together developers, market participants, policymakers, and other community members at various global events where people can collaborate on new ideas.

Devcon, the largest Ethereum developer conference, is set to return in 2023 (although a location has yet to be determined). Held in Colombia in 2022, the conference is a highlight for Ethereum enthusiasts, who often meet from different corners of the world to share their ideas and innovations on the second-largest blockchain.

Other notable events for Ethereum include the popular EthCC, which is scheduled to take place in Paris, France, from July 17-20 this year. Last year, at this conference, Layer 2 companies announced their ambitions for various rollup solutions.

Ethereum.org also hosts joint meetup groups and global ETH hackathons for Ethereum enthusiasts around the world, making it easy for "Ethereans" to connect with other like-minded individuals.