[ETH Letter] Ethereum Aims to Activate Sepolia Testnet on October 6

Ethereum Image. Source=Park Beom-soo/Digital Asset
Ethereum is a network that holds the largest ecosystem in the world in terms of key indicators such as the number of developers and total value locked (TVL).

In this ETH Letter, Ethereum Korea shares major news from the Ethereum ecosystem over the past week.

Ethereum Korea is an organization composed of Korean Ethereum Foundation officials and key contributors to the ecosystem.

Research Field News

1. ACDC 187th Meeting, Targeting Sepolia on October 6, and Starting Scoping for the Hegota Consensus Layer

Core Ethereum developers discussed the schedule for the Glaemsterdam testnet and the scope of the consensus layer for the upcoming upgrade, Hegota, at the ACDC 187th meeting.

ACDC is a meeting where core developers of the Ethereum consensus layer discuss key issues related to protocol upgrades.

Currently, the target activation date for the Sepolia testnet of Glaemsterdam is October 6.

The client release is aimed for September 29, ahead of this.

The Hudi testnet is targeted for activation on October 27.

Sepolia and Hudi are Ethereum testnets that test new rules and client compatibility before applying upgrades to the actual mainnet.

At the same time, scoping for the consensus layer of the upcoming upgrade, Hegota, has also begun.

Scoping is the process of determining which EIPs to include in the upgrade.

Among the candidates for the consensus layer, only EIP-8015 has reached the CFI stage.

CFI stands for Considered for Inclusion, meaning it is officially reviewed as a candidate to be included in a specific upgrade.

In contrast, seven proposals, including the BAL sidecar, have been excluded from this candidate group.

BAL refers to the Block Access List.

It is a structure that organizes in advance which accounts and storage spaces a specific block reads and modifies, allowing nodes to process blocks more efficiently.

A sidecar refers to a structure that transmits additional data alongside the core block.

Regarding EIP-8363, which deals with issuance reduction, it was decided to first determine the procedure for making decisions rather than immediately adopting or rejecting the technical content.

EIP-8363 is a proposal to reduce the new issuance of ETH by burning a portion of validator rewards as the staking ratio increases.

This proposal can affect not only validator rewards but also Ethereum's security budget, staking yields, and the entire on-chain financial market.

Therefore, rather than treating it as a simple technical EIP, discussions will focus on what social and technical consensus procedures will be followed to decide on changes to monetary policy.

In simple terms, Glaemsterdam has entered a stage where the schedules for the Sepolia and Hudi testnets are being specified, and Hegota has begun to seriously decide "what to include and exclude."

In particular, EIP-8363 is significant as it raises the question of how Ethereum will decide on issues with significant impact, such as issuance policy.

2. Ethereum Labs, "Let's Start with Quick Slots"

Ethereum Labs has urged the introduction of quick slots to first reduce Ethereum's block generation time.

The core proposal is EIP-8198.

Currently, one slot occurs approximately every 12 seconds in Ethereum.

A slot is the basic time unit in which validators propose blocks and other validators confirm them.

EIP-8198 aims to shorten this slot time to enhance the perceived speed of Ethereum itself.

As slots shorten, the time for users to confirm transaction results also decreases.

Layer 2, bridges, decentralized exchanges, and wallets can provide services based on faster Ethereum blocks.

Ethereum Labs believes that introducing quick slots first is a realistic approach before making complex changes such as long-term fast finality or one-slot finality.

One-slot finality is a structure that effectively confirms a block in a state that cannot be reverted within a single slot.

This provides very fast finality, but there are many technical issues to resolve, such as validator communication and signature processing.

In contrast, shortening slot time is a method that can be approached more gradually.

Terrence from Prism has also outlined the key technical elements needed to reduce slots.

To shorten slots, it is not enough to simply reduce the timer.

Block propagation, attestations, validator communication, signature verification, and client performance must all operate faster.

Attestation is the act of validators signing to indicate that a specific block is correct.

Client teams such as Teku, Prism, and Lodestar have also released their preferred EIP lists for Hegota.

This indicates that Hegota is not simply an upgrade that includes a few specific EIPs, but rather a discussion forum aimed at making the Ethereum consensus structure faster.

In simple terms, Ethereum Labs' argument is that "instead of starting with a massive change that reduces finality to a few seconds, let's first reduce the block generation interval to improve the actual user experience."

This discussion shows that Ethereum's performance improvement is expanding not only in terms of throughput but also in reducing the time it takes for blocks to be created and confirmed.

3. Blockspace Forum Launches Multi-Party Block Construction

The Blockspace Forum has launched Multi-Party Block Construction (MPBC).

MPBC allows multiple participants to contribute to block construction rather than having a single builder monopolize the entire block.

Currently, in the Ethereum block market, specialized block builders often gather profitable transactions to construct blocks.

Builders decide which transactions to include in the block and in what order.

If a small number of builders that generate high profits dominate the market, the authority to construct blocks can become concentrated.

MPBC is an experiment aimed at reducing this concentration.

In the current structure, the most valuable base block is created first, and then other builders can add additional transactions to it.

The initial version only supports the addition feature.

This means that it cannot rearrange or delete transactions within the existing block but can add transactions after an already created block.

The Blockspace Forum has also released a real-time dashboard.

Through this, it is possible to check how many blocks are being created through MPBC and how participants are composed.

In simple terms, while previously one builder constructed the entire building, MPBC allows multiple builders to add additional space after the basic building is created.

If this structure develops, it can reduce the problem of specific block builders excessively controlling transaction selection and order.

The launch of MPBC shows that discussions on Ethereum's decentralization are expanding not only to the number of validators but also to who constructs the actual blocks.

Ecosystem News

1. S&P Global Acquires OpenZeppelin

S&P Global has decided to acquire the blockchain security company OpenZeppelin.

OpenZeppelin is one of the most well-known companies in the field of Ethereum smart contract development and security.

In particular, OpenZeppelin Contracts is a widely used open-source library for developers implementing ERC-20 tokens, NFTs, access control, and upgradeable smart contracts.

After this acquisition, OpenZeppelin will operate as a division under the name OpenZeppelin within S&P Global.

OpenZeppelin Contracts will also remain open-source and free.

The existing team will continue to handle smart contract audits.

The acquisition amount has not been disclosed.

The main purpose of S&P Global's acquisition of OpenZeppelin is to strengthen on-chain risk assessment capabilities.

S&P Global is a leading provider of credit ratings and financial market data in the traditional finance sector.

However, as financial assets move onto the blockchain, traditional credit risk assessments are no longer sufficient.

New risks that arise solely on-chain, such as smart contract bugs, administrative privileges, bridge structures, oracles, and upgrade keys, need to be evaluated.

OpenZeppelin possesses capabilities in smart contract security and on-chain system analysis.

In simple terms, S&P Global aims to combine its credit assessment capabilities in traditional finance with OpenZeppelin's smart contract security expertise.

This acquisition is significant as it indicates that the risk assessment of traditional finance and blockchain security analysis are merging into a single market as tokenized assets expand.

2. Balancer Proposes Gradual Shutdown of Protocol

A governance proposal has been put forward to gradually shut down Balancer.

Balancer is one of the prominent automated market maker protocols in the Ethereum ecosystem.

Automated market makers allow users to trade assets through liquidity pools based on smart contracts instead of centralized order books.

The proposer pointed out that Balancer's monthly operating costs are about $150,000, while the protocol's revenue in August was only around $30,000.

The new version, V3, has also not sufficiently replaced the revenue of the existing V2.

This raises concerns that the current revenue structure is not sustainable for long-term operations.

If the proposal passes, Balancer will switch to a withdrawal-only mode starting October 30.

In withdrawal-only mode, new liquidity provision and trading functions will be reduced, focusing on allowing existing users to recover their assets.

A minimum remaining treasury of $9 million is proposed to be distributed based on the BAL burn rate starting from the end of May 2027.

BAL is Balancer's governance token.

A snapshot vote is scheduled to take place from September 25 to 29.

As this is still in the proposal stage, the shutdown of the protocol is not yet confirmed.

In simple terms, Balancer is considering an orderly wind-down of services due to the reason that "the revenue generated is too low compared to the costs of continuing operations."

This proposal illustrates that even a representative protocol of DeFi's first generation cannot guarantee long-term survival without a sustainable revenue structure.

3. Aave Proposes Custodial Collateral Lending Structure

A proposal has been made to introduce a custodial collateral lending structure for institutions on Aave.

The core idea is to allow institutions to borrow stablecoins using assets held in Anchorage as collateral without actually moving those assets to Aave's smart contracts.

Anchorage is a company that provides digital asset custody services for institutions.

Custody refers to the service where financial institutions or specialized businesses hold and manage customer assets on their behalf.

Due to regulations and internal controls, traditional financial institutions often find it difficult to arbitrarily move assets to external smart contracts.

In existing DeFi lending, users typically need to deposit collateral directly into smart contracts.

However, this proposal aims to verify the ownership and collateral status of assets held by custodians and provide on-chain loans based on that verification.

To achieve this, a new isolated hub-and-spoke structure is proposed for Aave V4.

The hub manages liquidity and core accounting, while the spokes connect specific assets or markets separately.

Using an isolated structure can reduce the risk of issues in the institutional custodial collateral market spreading to the general Aave market.

In simple terms, it allows for on-chain loans without needing to physically remove assets from a bank vault, confirming that "these assets are indeed being held."

This proposal is significant as it attempts to enable traditional financial institutions to utilize DeFi liquidity while maintaining their existing custodial frameworks.

It also indicates Aave's expansion from a simple on-chain lending protocol to an institutional credit infrastructure.

4. Base to Introduce Native Account Abstraction Based on EIP-8130 This Year

Base has announced that it will introduce native account abstraction based on EIP-8130 by the end of this year.

EIP-8130 is a proposal to introduce a keystore account structure.

A keystore is a storage structure that manages the keys and permission information used by an account separately.

By utilizing this, instead of entrusting all permissions to a single private key, multiple keys and permissions can be managed according to their purpose.

Native account abstraction aims to include such functionalities directly into the blockchain's account structure rather than as a separate feature of wallet apps.

For example, it would make it easier to implement features like wallet recovery, session keys, fee delegation, multi-signature, and limited permissions for AI agents.

The issue is that the Ethereum mainnet is currently moving around another account abstraction proposal, EIP-8141.

EIP-8141 has been designated as the execution layer headliner for Hegota.

Base maintains that introducing EIP-8130 first does not prevent the future adoption of EIP-8141.

However, Derek Chiang from Ether Labs has publicly stated that collaboration to align account abstraction standards has broken down.

As a result, there is a possibility that Ethereum Layer 1 and major Layer 2s will adopt different native account structures first.

In simple terms, both Ethereum mainnet and Base are working on creating "smarter accounts," but their methods are diverging.

If standards diverge, wallet and app developers will need to support different account structures, complicating user experience.

This debate highlights that the critical issue is not just the account abstraction technology itself, but how well Ethereum Layer 1 and Layer 2 can maintain a common standard.

Community News

1. zkKYC Debate Rekindled by Revolut Data Breach

The data breach of Revolut has reignited the debate over customer verification using zero-knowledge proofs, known as zkKYC.

Revolut has acknowledged that it inadvertently shared some customer information with external parties after being deceived by a request impersonating a government agency.

The leaked information reportedly includes passports, selfies, and transaction histories involving Bitcoin.

This incident has once again highlighted the risks of the current structure where financial institutions store large amounts of personal data for customer verification.

Customer verification is the process by which financial companies confirm a customer's identity and transaction purpose.

While it is used to prevent money laundering and the movement of criminal funds, the issue arises from the need for financial companies to store sensitive information like passports, addresses, and facial photos in bulk.

One of the ideas to address this is zkKYC.

zkKYC uses zero-knowledge proofs to demonstrate that necessary conditions have been met without disclosing personal information itself.

For example, it can create a structure where a user proves they are over 18 and not a sanctioned individual without providing their name, date of birth, or passport number to the service provider.

Following this incident, there have been renewed calls to expand zkKYC using projects like zkame, zkpass, and Privado ID.

However, there are opposing views as well.

Donno from L2Beat Research argues that instead of technically improving the customer verification system, discussions should focus on eliminating the system altogether.

This highlights the difference between whether to better protect personal information while conducting customer verification or to reconsider the premise of large-scale identity collection.

In simple terms, this debate contrasts two approaches: "How can we disclose less personal information necessary for KYC?" and "Should we even conduct KYC as we do now?"

The Revolut incident has prompted a reevaluation of whether blockchain privacy technologies can be utilized to change the structure of personal data collection by financial institutions, beyond merely hiding transactions.

2. Coliseum Hackathon Opens Ethereum Track

The Ethereum ecosystem track has opened at the online hackathon Crypto World Fair.

The event runs from September 14 to October 12.

Separate tracks for Ethereum Layer 1, Base, Arbitrum, and Robinhood Chain have been established.

Each track has a prize of $25,000.

Ether Labs is also participating as a sponsor of the event.

The hackathon is an event where developers and builders compete to create new apps or technologies within a limited timeframe.

Many major projects in the Ethereum ecosystem have started at hackathons.

This event does not only cover Ethereum mainnet apps but also includes different execution environments like Base, Arbitrum, and Robinhood Chain.

This shows that the current Ethereum developer ecosystem is evolving from a single chain structure to one that encompasses multiple Layer 2s and app chains.

On September 22, an Ethereum Foundation workshop is also scheduled to take place.

The workshop will directly address topics related to Ethereum development and protocols, providing participating developers with opportunities to connect with ecosystem researchers.

In simple terms, this hackathon supports developers in creating new services across various environments, from Ethereum mainnet to enterprise app chains.

With the participation of Ether Labs and the Ethereum Foundation, it can serve as a pathway to discover new Ethereum builders and projects.

3. Ethereum Institutional Hiring Asia-Pacific Lead

Ethereum Institutional, a nonprofit organization supporting the adoption of Ethereum by institutions, is hiring a lead for the Asia-Pacific region.

Ethereum Institutional is an organization that helps traditional financial institutions such as banks, securities firms, and asset management companies adopt Ethereum and on-chain finance.

This position will be responsible for connecting institutions in the Asia-Pacific region with the Ethereum ecosystem.

The preferred work locations are Hong Kong and Tokyo.

Applicants are required to have 5 to 7 years of experience in traditional finance.

In addition to English, proficiency in major Asian languages such as Chinese is also a prerequisite.

This indicates that they are looking for personnel who can collaborate with actual decision-makers in financial institutions, rather than just simple developer relations roles.

Understanding blockchain technology alone is not sufficient for institutions to adopt Ethereum.

They also need to understand traditional financial structures such as tokenization, custody, regulation, accounting, stablecoins, payments, and asset management.

In simple terms, Ethereum Institutional aims to hire personnel from traditional finance who can directly engage with Asian financial institutions to significantly expand the institutional adoption of Ethereum.

This hiring shows that the expansion of Ethereum for institutions, which was previously focused on the US and Europe, is now extending to the Asian market, including Hong Kong and Japan.

Weekly Ethereum Data

Annual inflation rate: 0.874%

Weekly net supply: 20,438.91 ETH

Staking ratio: 34.74%

Stablecoin market cap: $146.64 billion

Net outflow of US Ethereum spot ETFs: $140.6 million

Source: Ultrasound Money, DeFi Llama, Dune, Parsec Investors

This article was written by a contributor from Ethereum Korea and The Ticker is ETH.

You can view individual real-time news from this letter here.