An announcement made by Vitalik Buterin on January 2, 2018, cut right to the core of the scalability issue, unveiling two subsidy initiatives designed to reward participants for committing their resources to sharding and second layer protocols.
The foundation invites teams of developers, companies, and universities to apply for subsidy amounts between $50,000 and $1,000,000, rewarding participants for committing their resources to expanding the capacity of the ecosystem. Subsidies would be awarded based on merit, alongside the scope, scale, and quality of the project's impact.
Acknowledging that scalability was perhaps "the single most important key technical challenge" for blockchain applications to reach mass adoption, Buterin noted that the two main paths to scalability – sharding and second layer protocols – are "complementary with each other." As a result, the Ethereum Foundation will support a multi-pronged approach towards scaling Ethereum out to meet demand, which has grown to nearly 1 million transactions per day.
With the Foundation's stated goal of scaling Ethereum to process a higher volume of transactions, sharding has come under the lens. This method for distributing the throughput of the blockchain across multiple "shards" would eliminate the need for every node in the network to process every transaction.
As sharding development approaches an initial prototype, its next step towards implementation would require a multi-client ecosystem to provide testing.
"In this next step," Buterin relates to the Ethereum community, "we want you to be involved. We want the Ethereum sharding testnet, and later sharding mainnet, to be a multi-client ecosystem right from the start, with the Ethereum Foundation not supporting any single privileged production implementation."
"The Ethereum Foundation will be making subsidies available to independent groups in the community that want to help build an implementation and participate in the sharding testnets and mainnet. These payments are NOT intended to be sources of substantial profit to recipient organizations; they are rather intended to cover some of the costs involved, with the understanding that anyone who participates in the scheme will have access to a unique opportunity to participate in Ethereum 2.0 development, with close collaboration with core Ethereum researchers, and be part of the development of one of the first clients that will be available when the sharding mainnet goes live."
An Ethereum Foundation-funded research team will provide ongoing integration for Python, as a proof of concept.
Second Layer Solutions
Outside of sharding, second layer scalability solutions, like Plasma and state channels, are also receiving a subsidy program to encourage their proliferation and research their application.
Simply put, the second layer refers to all the auxiliary platforms and protocols that act as digital dumping grounds where activities taking up room on main chains can be offloaded. Often enough, these alternative digital spaces are blockchains themselves, but they don't function as standalone blockchains; the transactions that they support must eventually be verified on the base layer in some way.
Buterin said the Ethereum Foundation wants to provide an opportunity for those teams to "to exercise their creativity and build out their scalable blockchain proposals, all while staying within the Ethereum family."
The goal of the Foundation is to encourage developments that would make the Ethereum blockchain more robust:
"To that end, we are announcing a subsidy scheme for projects that are building scalability and latency-reducing "layer 2" platforms that live on top of Ethereum, benefitting from the Ethereum blockchain's security as a base layer and interoperability with the greater Ethereum community and platform."
Applicants are asked to submit their official project's name, name of the applicant, and a list of core developers to the foundation via email. The application should also include a proposal regarding the project's impact on scalability, background information on the team such as any cryptographic-, blockchain-, or Ethereum-related work, as well as a timeline, an estimated budget and a grant request.