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Ethereum Layer 2: The Significance of EIPs

Zainab Saberi

Jul 12, 2023 • 11 min read

What are EIPs?

EIPs represent formal propositions aimed at enhancing the Ethereum blockchain. Drawing parallels, EIPs resonate with Bitcoin Improvement Proposals (BIPs) and offer a platform for the Ethereum community to pitch, deliberate, and actualize modifications to the Ethereum framework.

Also Read: Ethereum Gas

Understanding EIPs

Proposed advancements or changes to the Ethereum framework are encapsulated in documents known as Ethereum Improvement Proposals (EIPs). Comprising a structured layout, these documents ensure clarity, comprehensiveness, and brevity. The canvas of EIPs stretches across various topics, including technical specifications, novel attributes, norms, and alterations to pre-existing functionalities in the framework.

EIPs pave the path for the Ethereum community members to propose alterations to the framework, triggering discussions around these propositions. These proposals can emanate from diverse contributors including, but not limited to, developers, scholars, and general community participants.

The journey of an EIP involves traversing through rigorous community review and discussions, encompassing peer evaluation and feedback. Upon gaining acceptance, it gets integrated into the Ethereum Improvement Proposal system, awaiting its incorporation in the imminent protocol update.

Also Read: Ethereum Merge

Termed as a hard fork, this protocol update symbolizes a phase where the Ethereum codebase undergoes modifications, with the revised code disseminated across the network. These hard forks are pivotal, ensuring synchronicity in rules and protocols network-wide.

The fruition of EIPs holds paramount importance, facilitating the metamorphosis of the Ethereum network to cater to dynamic requisites and user expectations. This not only paves the way for pioneering decentralized applications (dApps) but also augments the Ethereum network's security, scalability, and efficiency.

Also Read: Components of Ethereum Network

Why are EIPs important for the Ethereum ecosystem?

Serving as the nucleus for governance and documentation, EIPs, which encompass ERCs, uphold the decentralized essence of Ethereum. They facilitate any participant to pitch, discuss, and integrate changes. Whether assimilated as a standard or amalgamated into a comprehensive network enhancement, EIPs delineate the functionality of certain tokens and Ethereum facets concerning specific smart contracts. Each network enhancement incorporates specific EIPs, essential for Ethereum clients to retain consensus amongst themselves.

- Facilitating Innovations: EIPs extend the capability to infuse novel features and functionalities into the network. This not only broadens the horizon for revolutionary decentralized applications but also caters to the evolving user needs.

Also Read: ERC 4337

- Championing Transparency: EIPs champion the ethos of transparency and inclusiveness within the Ethereum community's realm. The EIP submission doors are open for all, irrespective of one's credentials or expertise, ensuring a diverse pool of ideas and viewpoints when broaching network changes. The community's collective endeavor in reviewing and discussing proposed alterations guarantees their meticulous evaluation and fine-tuning prior to implementation.

- Bolstering Security: EIPs play an instrumental role in fortifying the security grid of the Ethereum network. The mandatory and rigorous review trajectory ensures mitigation of potential bugs, vulnerabilities, or other glitches, fortifying the network's resilience. This instills confidence and trust among the user and developer communities, laying the foundation for the enduring prosperity of the network.

Also Read: Matic Staking Rewards

History of EIPs

Ethereum Improvement Proposals, commonly known as EIPs, have their roots back to 2015, the year Ethereum was birthed. Drawing inspiration from Bitcoin's proposal system, Ethereum set out to have its own system for network enhancement. EIP-1 took the lead, establishing the groundwork for subsequent EIPs. Over the years, numerous EIPs have paved the way for vast improvements within the Ethereum ecosystem.

The standout EIP? Certainly, EIP-1559. Introduced in 2018 and integrated in the London hard fork of August 2021, this EIP heralded a paradigm shift in Ethereum's fee structure, aspiring for more efficient transaction costs. Its successful integration was a testament to Ethereum's resilience and adaptability.

Another significant stride in Ethereum's evolution was the inception of EIP-721, which gave birth to the ERC-721 standard for non-fungible tokens (NFTs). Ethereum now plays a pivotal role in the booming NFT market, facilitating transactions of digital assets worth billions.

The EIP system isn't just about innovations; it's about community. With every proposed change, the Ethereum community steps in, ensuring a robust review process that mitigates any potential risks to the network's integrity.

Also Read: Matic Staking Rewards

How are EIPs created and implemented?

The journey of an EIP, from conception to activation, is meticulous. Here's a step-by-step breakdown:

1. Drafting

The first step is the birth of an idea. This idea, meant to better the Ethereum network, is drafted in a structured document. This draft delves into the proposal's intent, benefits, drawbacks, and technical nuances, offering the community a comprehensive look.

2. Review

Once the draft is out, it's the community's turn to dissect it. Through rigorous feedback, potential flaws are identified, and improvements suggested. This review ensures that the community's collective intelligence shapes the EIP's trajectory.

3. Last Call

With community inputs integrated, the EIP reaches the "Last Call" phase. Here, the community gets a final say, vetting the refined EIP. If the consensus is positive, the EIP inches closer to becoming a reality.

4. Acceptance

The community's nod of approval marks the EIP's acceptance. It's now ready to be part of the upcoming protocol updates.

5. Implementation

Post acceptance, the technical task begins. Developers get to work, integrating the EIP into the Ethereum client software. Ensuring compatibility and alignment with the EIP's specifications is crucial here.

6. Testing

An implemented EIP isn't rushed into activation. Rigorous testing ensures that the EIP doesn't bring along any bugs or vulnerabilities.

7. Activation

After the exhaustive checks, the D-day arrives. The EIP is activated during the subsequent protocol update, often through a hard fork. It mandates all nodes to transition to this updated software.

8. Monitoring

The journey doesn't end at activation. Continuous monitoring ensures that the EIP functions as envisioned, maintaining the Ethereum network's stability and security.

With each EIP, Ethereum's horizon expands, catering to the dynamic needs of its global crypto audience. The EIP process, emphasizing community involvement and rigorous checks, ensures Ethereum's innovative and secure growth.

Types of Ethereum Improvement Proposals

EIPs are essentially proposals suggesting changes or improvements to the Ethereum protocol. These are categorized into three significant types:

1. Standard Track EIPs

EIPs under this type aim at proposing changes that directly affect the Ethereum protocol. These are further segmented into:

- Core EIPs: Propose vital changes necessary for the seamless operation of the Ethereum network. Their implementation needs a hard fork.

- Networking EIPs: These discuss changes in the communication methodology among nodes and necessitate a soft fork for implementation.

- Interface EIPs: These focus on modifications in the Ethereum API or its user interface, eliminating the need for a fork.

- ERCs (Ethereum Request for Comment): Their main focus is on the standards for Ethereum-integrated tokens or smart contracts. Implementation doesn’t require a fork.

2. Meta EIPs

Under this category, EIPs suggest alterations to the EIP procedure itself, also recognized as process EIPs.

3. Informational EIPs

These provide crucial insights or guidelines about a specific Ethereum topic. However, they do not recommend any new feature additions.

It's worth noting that each EIP is distinguished by a unique number, title, and author(s). These EIPs are widely discussed on Github. When accepted, they are granted an “Accepted” status, and a “Final” status is assigned upon implementation in a client.

EIP Status Terms

The journey of an EIP goes through several status terms, which highlight their progression and current implementation phase. These statuses include:

1. Idea: A pre-draft state that isn’t tracked within the EIP repository.

2. Draft: The EIP’s initial state post-proposal. It remains open for community discussions and feedback.

3. Review: At this juncture, the author signifies the EIP’s readiness for Peer Review.

4. Last Call: This status is granted after multiple reviews, indicating readiness for final community feedback.

5. Final: Implementation of the EIP in the Ethereum network occurs.

6. Stagnant: Any EIP remaining in Draft or Review status for 6+ months is shifted to this status. They can be reactivated.

7. Withdrawn: Indicates the authors' withdrawal of EIP due to various reasons, but there's potential for future consideration.

8. Living: Unique status for continuously updated EIPs that aren’t meant to reach finality.

Who decides on EIPs?

The fate of an EIP lies in the hands of the Ethereum community. This community, comprising developers, miners, node operators, and various stakeholders, reaches a decision through a consensus mechanism. Once approved, the EIP joins the Ethereum Improvement Proposal system and gets incorporated during the next protocol update.

Among the primary groups steering the EIP process are the Ethereum Core Developers. Their main job is to maintain the Ethereum client software while playing an instrumental role in testing and reviewing network changes. Comprising experienced developers and technical experts, they know profoundly about the Ethereum protocol and ecosystem.

Another pivotal group in this process is the Ethereum Cat Herders. Acting as a bridge between the Ethereum community and the Core Developers, they help streamline discussions about proposed changes. They are champions of transparency and inclusivity in the Ethereum community.

Other notable contributors include the Ethereum Magicians, focusing on Ethereum development best practices, and the Ethereum Foundation, a supportive pillar providing funds and resources for Ethereum ecosystem development.

Format of an EIP

The structure of an EIP is consistent and is based on a specific template that comprises multiple sections:

- Preamble: This segment features the EIP number, title, the names of the authors, and its current status.

- Abstract: This portion offers a concise overview of the anticipated alteration or enhancement.

- Motivation: This segment articulates the reason behind the suggested alteration or enhancement.

- Specification: This part provides an in-depth account of the anticipated alteration or enhancement.

- Rationale: This segment elaborates on the logic behind the design of the suggested alteration or enhancement.

- Backward Compatibility: This section sheds light on the impact of the anticipated alteration or enhancement on pre-existing contracts or applications.

- Test Cases: This portion offers scenarios illustrating the testing processes for the suggested alteration or enhancement.

- Implementation: This segment offers insights on the execution plan for the anticipated alteration or enhancement.

- Security Considerations: This section delves into potential security implications linked to the anticipated alteration or enhancement.

Examples of EIPs

Currently, there exist more than 300 EIPs that have been proposed and subsequently accepted. A few of the most prominent EIPs are as follows:

- EIP-20: ERC-20 Token Standard - This EIP introduces a consistent interface for tokens based on Ethereum, streamlining the process for developers to design and introduce new tokens on the Ethereum blockchain.

- EIP-721: Non-Fungible Token Standard - This EIP offers a standardized interface for the development and management of non-fungible tokens (NFTs) on the Ethereum blockchain. NFTs have garnered immense popularity recently, especially within the realms of art and gaming.

- EIP-1559: Fee Market Change for ETH 1.0 Chain - This EIP advocates a modification in Ethereum’s fee market, aiming to stabilize and make transaction fees more consistent, a change beneficial for both users and dApp creators.

- EIP-1962: Add precompile for EdDSA signature verification - This EIP pushes for the introduction of a prearranged contract for optimized signature verification deploying the EdDSA algorithm.

- EIP-155: Simple replay attack protection - This EIP emerged during the Ethereum and Ethereum Classic hard fork in 2016, aiming to thwart replay attacks. It introduced a section to the transaction information ensuring a transaction intended for one chain isn’t duplicated on the other.

- EIP-712: Signing Standard - This EIP suggests a benchmark for designing typed data communications that can be endorsed and confirmed by Ethereum accounts. This standard is instrumental for creating decentralized apps needing off-chain data to be endorsed and confirmed on-chain.

- EIP-1011: Hybrid Casper FFG - This EIP pushes for a combined consensus method for the Ethereum network, amalgamating proof-of-work and proof-of-stake. The primary objective of the EIP was to amplify the scalability and protection of the Ethereum network.

- EIP-2025: Difficulty Bomb Delay - This EIP aims to postpone the “difficulty bomb” embedded in the Ethereum protocol. This inherent feature gradually amplifies mining difficulty. The primary objective of the EIP was to provide the Ethereum network with more time to transition to a proof-of-stake consensus mechanism.

Crucial Ethereum Improvement Plans (EIPs)

To provide a clear perspective on the utilization of EIPs and their influence, let's delve into a few notable instances from the past years.

NFTs

Non-fungible tokens – a blossoming sector valued currently at $3bn – originated from the EIP mechanism, with EIP-721 being the catalyst for the introduction of this novel token type.

Gas Charges

Conversely, EIP-1559 brought a transformative alteration to the charging methodology for Ethereum transactions and their sequence of processing. In a blockchain realm where gas costs are frequently disputed, this stands as a pivotal modification that began as a simple enhancement suggestion.

The Merge

Arguably, the most evident illustration of EIPs in action is the Merge, triggered by EIP-3675. This initiative led to the Ethereum blockchain transitioning from its inaugural proof-of-work validation system to the more eco-friendly Proof-of-Stake framework. This shift aimed to amplify the scalability and proficiency of the entire blockchain and its surrounding network.

A Progressive Blockchain for a Dynamic System

With the continuous advancement of the Ethereum blockchain, Ethereum Enhancement Initiatives are pivotal in molding its trajectory and capability to bypass existing challenges.

These proposals empower the collective to refine the network via collective brainstorming and grasping the intricate details of the operation. This approach also paves the way for broader participation in driving enhancements: one's opinion truly matters. Dive deeper into EIPs to grasp more about Ethereum network progressions – you might even present your distinct suggestion.

Benefits of EIPs

Invention and adaptability: EIPs facilitate a relentless wave of invention and refinement in the Ethereum platform. With the advent of fresh concepts and tech, EIPs can be presented to weave these modifications into the system.

Driven by the masses: EIPs usually emerge and flourish under the aegis of the Ethereum collective, comprising coders, miners, and other key players. This guarantees that suggestions are rooted in the community's desires and considerations.

Clarity and inclusivity: EIPs are accessible for public scrutiny and insights, promoting clarity and inclusivity in the choice-making dynamics. This fosters confidence and accord within the collective.

Uniformity: EIPs contribute to the homogenization of the Ethereum platform, streamlining the process for coders to create utilities and applications in sync with the system.

Drawbacks of EIPs

Intricacy and execution hurdles: Certain EIPs can be intricate, posing challenges in their execution or amalgamation with the prevailing system, potentially causing postponements or execution hindrances.

Unforeseen repercussions: Some EIPs might usher in unforeseen outcomes that aren't instantly discernible. This is notably tricky for large-scale transitions that could impact numerous network facets.

Centralization risks: Despite being propelled by the community, the EIP execution can occasionally be monopolized by select individuals or entities. This might spark worries about the network's decentralization and robustness.

Aversion to modifications: Particular Ethereum community members might oppose forthcoming changes, especially if they perceive potential adverse effects on their stakes. This can complicate the consensus-building and realization of the modifications."

Frequently Asked Questions [FAQs]

Q: How does the EIP process work?

A: The EIP process involves the submission of improvement proposals to address specific issues or introduce new features to the Ethereum platform. These proposals undergo scrutiny, feedback, and revisions before they are finalized and implemented.

Q: Who is involved in the EIP process?

A: The EIP process involves members of the Ethereum community, including coders, miners, and other key players. They contribute by proposing, developing, reviewing, and deciding on the EIPs.

Q: How are EIPs reviewed and approved?

A: EIPs are open for public scrutiny and insights, ensuring transparency and inclusivity in decision-making. Proposals typically undergo thorough review and discussions, and only those that gain consensus and address community needs are approved.

Q: What are some challenges and controversies surrounding EIPs?

A: Challenges include the intricacy of some EIPs leading to implementation hurdles, unforeseen outcomes of EIPs, concerns about potential centralization in the implementation process, and resistance from community members who may feel the changes might negatively affect their interests.

Q: How do EIPs impact the Ethereum community and ecosystem?

A: EIPs play a pivotal role in shaping the trajectory of the Ethereum platform. They enable continuous innovation, address challenges, and ensure the platform remains adaptable and progressive, meeting the needs of its growing ecosystem.

Q: Can anyone propose an EIP?

A: Yes, the process leaves the door open for anyone to propose an EIP. The system encourages open collaboration, ensuring that anyone can participate and contribute to the network's enhancement.

Q: What happens if an EIP is rejected or not implemented?

A: If an EIP is rejected or not implemented, it could be due to lack of consensus, potential adverse effects, or other concerns raised by the community. The proposal might either be discarded, revised, or held for future consideration.

Q: How do EIPs relate to other Ethereum standards, such as ERCs?

A: While EIPs focus on broader improvements to the Ethereum platform, ERCs (Ethereum Request for Comments) specifically address token standards on the Ethereum blockchain. EIPs can encompass ERCs, but ERCs are a subset, primarily dealing with token standardization.