EIP Analysis: September 2024

Introduction: What are Ethereum Improvement Proposals (EIPs)?

Ethereum Improvement Proposals, or EIPs, are the cornerstone of Ethereum’s innovation. They serve as formal documents proposing changes to the Ethereum protocol or ecosystem. These changes can range from core protocol adjustments to new standards for applications built on Ethereum. By offering a structured way to propose, debate, and implement improvements, EIPs allow the Ethereum community to evolve through consensus and transparent development.

EIPs provide a mechanism for proposing not just enhancements but also resolving issues, introducing new standards like token types (e.g., ERC-20 and ERC-721), and transitioning Ethereum into new technological eras, such as the switch from Proof of Work (PoW) to Proof of Stake (PoS). Ultimately, EIPs represent the collective effort of developers, researchers, and the Ethereum community to make Ethereum more robust, scalable, and user-friendly.

How Does One Submit an EIP?

The process of submitting an EIP follows several clearly defined steps to ensure transparency, community input, and technical scrutiny:

1. Idea Formation: The proposer formulates an idea, outlining the purpose, potential impact, and technical challenges. At this stage, the EIP is not formally tracked and is primarily focused on gathering early community feedback.
2. Draft Proposal: Once the idea has gained some support, it is formalized into a draft. This involves forking the EIP repository, creating an file using the standard template, and submitting a pull request (PR). The draft must adhere to the required format, which includes sections like the abstract, motivation, technical specifications, and backward compatibility considerations.
3. Community Engagement: After creating the draft, it is shared publicly, often in forums like the Ethereum Magicians Forum. This step is crucial for gathering feedback and refining the proposal based on input from developers and the broader Ethereum community.
4. EIP Editor Review: An editor reviews the proposal to ensure it follows the correct format and structure. Editors do not evaluate the technical merits or viability of the idea but check for completeness and adherence to guidelines. If accepted, the proposal receives an official number and is added to the repository.
5. Peer Review and Request for Comments (RFC): During this stage, the draft undergoes more extensive peer review. The community is encouraged to provide detailed feedback, and the proposal can be updated based on suggestions. This phase typically lasts a minimum of 45 days to allow for thorough review.
6. Last Call and Finalization: If the peer review is successful, the EIP moves to the "Last Call" phase, which is the final opportunity for the community to raise concerns. The editor sets a Last Call deadline, usually around 14 days. If no major issues arise, the it is considered finalized.
7. Implementation and Consensus: Finalized EIPs are candidates for inclusion in future Ethereum upgrades. However, they are not automatically added. Core developers, authors, and the community discuss potential upgrades in meetings like AllCoreDev to decide which EIPs will be bundled into the next network upgrade.

By following these stages, these proposals undergo rigorous scrutiny before being implemented in Ethereum.

Insights: EIP Trends

In this month’s analysis, we aim to explore Ethereum Improvement Proposals from a foundational perspective. Using the excellent resource that is the Ethereum EIP list, we first examine them by type and highlight some prominent authors. While it is impossible to cover each one in detail, certain EIPs are so influential that their numbers are ingrained in the minds of every crypto enthusiast. We will focus on these key EIPs and, using Dune Analytics graphs, demonstrate their real-world impact.

EIP by Type

EIPs are categorized into several main types: Standard Track, Meta, and Informational. Each type has its own subcategories and purposes. The graph below highlights the distribution of these types, giving insight into the areas where Ethereum is evolving the most.

1. Standard Track EIPs:
   • Core: These EIPs require changes that affect the consensus layer of Ethereum, such as network protocol changes or upgrades that require a hard fork (e.g., EIP-5, EIP-211). These changes are critical to the core protocol and involve deep discussions among core developers.
   • Networking: This category involves improvements to Ethereum’s network protocol, such as peer-to-peer communication protocols like devp2p (e.g., EIP-8), Light Ethereum Subprotocol, and proposals for Whisper or Swarm.
   • Interface: Focuses on improvements to client APIs and remote procedure call (RPC) specifications, such as method names or contract ABIs (e.g., EIP-6). Discussions around these typically happen in the interface repository before submission to the EIPs repository.
   • ERC (Ethereum Request for Comment): Application-level standards for Ethereum, including widely used token standards (e.g., EIP-20), naming registries (e.g., EIP-137), and other conventions for application development (e.g., EIP-4337 for account abstraction).
2. Meta EIPs:
   • These describe changes to the processes surrounding Ethereum itself, rather than the protocol. Meta EIPs may involve new procedures, guidelines, or modifications to the tools or environments used in Ethereum development. They require community consensus and are similar to process changes but do not affect the codebase directly (e.g., EIP-1).
3. Informational EIPs:
   • These provide insights, recommendations, or design information but do not propose new protocol features or require community consensus. Informational EIPs can be ignored or adopted at the discretion of users and developers, as they are simply advisory.

Through our analysis, we identified 1,077 unique authors contributing to Ethereum's development. This vast group of researchers includes many prominent contributors, and we’ve highlighted the top 25 based on their contributions. You may recognize familiar names in our graph, including some of the esteemed original EIP editors, who play the crucial role of ensuring EIPs are technically sound and properly formatted.

In-Depth Review of Classic EIPs

These are some of the most prominent EIPs that have significantly shaped the Ethereum ecosystem. This brief overview of their content and real-world impact will quickly bring you up to speed on the most frequently discussed EIPs.

EIP-779: The DAO Fork

• Date of Implementation: July 20, 2016
• Details: EIP-779 introduced a hard fork to address the infamous DAO hack, which led to a division in the Ethereum community. The fork resulted in two distinct blockchains: Ethereum (ETH) and Ethereum Classic (ETC). Ethereum returned the stolen funds to affected users, while Ethereum Classic maintained the blockchain's immutability.

EIP-3675: Transition to Proof of Stake

• Date of Implementation: September 15, 2022
• Details: This EIP marks Ethereum’s historic transition from Proof of Work (PoW) to Proof of Stake (PoS). This switch was a significant step toward energy efficiency, drastically reducing Ethereum’s carbon footprint while maintaining security through staking mechanisms.
• Visual: In the graph, you can notice that in September of 2022, energy consumption massively decreased - by an impressive 99.84%.

EIP-1559: Base Fee and Burn Mechanism

• Date of Implementation: August 5, 2021
• Details: EIP-1559 revolutionized Ethereum’s fee structure by introducing a base gas fee, which is burned instead of being paid to miners. This proposal aims to stabilize transaction fees and reduce inflationary pressure on ETH.
  • EIP-1559 introduced the concept of a base fee and variable block size.
  • Every user must pay the threshold gas fee to be included in a block.
  • This threshold is determined by the block size:
    • Blocks have a variable size ranging from 1 gas unit to 30 million gas units, with 15 million being the optimal size.
    • If the block size is less than 15M, the base fee is considered too high. If more than 15M, it is too low. At 15M, it is considered balanced.
  • The revenue earned from the base fee is burned rather than given to miners, helping make Ethereum deflationary.
    • Miners earn revenue through tips (a priority fee) from users who want their transactions included faster.
• Visuals:
  • Since the London Hard Fork (which included this EIP), the ETH burned metrics are visible.
  • In the second graph, variations in base fees show the intended fairness and stability in gas fees paid by users.

• Date of Implementation: March 13, 2024
• Details: EIP-4844 focuses on reducing transaction costs on Layer 2 scaling solutions. By introducing 'proto-danksharding,' it aims to make Ethereum more scalable and affordable for users. This ramped up L2 usage. You can read more about proto-danksharding on our Dencun Upgrade blog.
• Visuals: It is evident that March 2024 was a turning point when L2 usage overtook L1 by a large margin

• Date of Implementation: September, 2017
• Details: ERC-20 introduced a standard for fungible tokens, creating the foundation for a wide range of tokens used in ICOs, DeFi, and other applications.
• Visuals: ERC-20 tokens continue to be heavily used across the ecosystem, as displayed in the last 6 months.

• Date of Implementation: January 24, 2018
• Details: ERC-721 set the standard for NFTs, enabling the rise of unique digital assets such as art, collectibles, and gaming items.
• Visuals:
  • ERC-721 tokens continue to be used for NFT purposes, even though their usage has decreased significantly since its boom in 2022.
  • Contracts deployed in last 6 months.

• Date of Implementation: June 17, 2019
• Details: ERC-1155 unified the management of fungible and non-fungible tokens, allowing both types to be managed under a single contract, optimizing efficiency for developers.
• Visuals: ERC-1155 volume in last 6 months.

• Date of Implementation: March 2023
• Details: ERC-4337 enables account abstraction, making Ethereum wallets more flexible and user-friendly. It simplifies wallet management, allowing smart contracts to handle complex wallet operations.
• Visuals: Since its inception, we have seen a continual rise in interest.

EIPs like the ones mentioned above will continue to be pivotal in Ethereum’s evolution. As of this writing, the Ethereum community is looking forward to the Pectra Upgrade, which consolidates the Prague and Electra updates into a single release. This upgrade introduces significant improvements such as EIP-7702 and EIP-7251. EIP-7702 enhances wallet functionality by enabling them to temporarily act like smart contract wallets, boosting both security and usability. On the other hand, EIP-7251 allows validators to stake more Ethereum, contributing to greater network efficiency.

EIP-7702: Flexible Wallet Operations

• Date of Implementation: TBD
• Details: EIP-7702, part of the Pectra upgrade, introduces account abstraction, allowing wallets to act like smart contract wallets. Features include transaction sponsorship, sub-keys with restricted permissions, and enhanced security measures like recovery options. This improves accessibility, security, and user experience, potentially boosting Ethereum adoption.

EIP-7251: Higher Validator Staking Limits

• Date of Implementation: TBD
• Details: EIP-7251 increases the maximum validator stake to 2048 ETH, aiming to reduce validator counts and improve network efficiency. This benefits large node operators by streamlining their operations and solo stakers by offering greater rewards potential.
• Visuals: The current increasing number of validators is expected to drop.

Conclusion

Ethereum's journey through various EIPs has been fundamental in shaping its present-day ecosystem. These proposals offer unique insights into the technical evolution, scalability solutions, and user experience enhancements that continue to drive Ethereum's growth. With each new EIP, Ethereum moves closer to its vision of being the world’s most decentralized, secure, and efficient blockchain platform.

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