Vitalik sternly warns: Ethereum off-chain activities are colluding, which may face the risk of being untraceable.

Ethereum co-founder Vitalik Buterin issued a stern warning that while blockchain security can prevent most validators from colluding to steal on-chain assets, this protection completely disappears when users trust validators to perform off-chain tasks, even facing the risk of being unable to recover assets.

Vitalik Defines the Security Boundaries of Ethereum: The Essential Differences Between On-Chain and Off-Chain

(Source: EMLearning)

The blockchain protocol enforces strict validation rules, with each node independently verifying transactions by checking signatures, preventing double spending, and ensuring that state transitions adhere to protocol logic. This decentralized verification means that colluding validators cannot forge transactions or create invalid blocks that steal user funds. The decentralized nature of this system ensures that even majority control cannot override these fundamental safeguards.

This is why even if 51% of the validators collude, they cannot simply “steal” assets on the Ethereum blockchain. The mathematical foundation of the blockchain—elliptic curve cryptography, hash functions, Merkle trees—ensures that only those with the private key can move the assets. The role of validators is merely to sort transactions and package blocks, not to control the assets themselves. This “non-takeability” is the core advantage of blockchain over traditional financial systems.

However, when validators handle off-chain tasks (such as oracle data feeds, governance decisions, or restaking services), this protection becomes ineffective. These activities do not fall within the execution scope of blockchain algorithms and rely on the honesty of the validators. In the absence of cryptographic proof that protects on-chain transactions, most people may provide false data or manipulate results. Users affected by such off-chain collusion have no automatic dispute resolution or recovery mechanism. The blockchain is unable to verify or question decisions made outside its consensus layer, resulting in victims being unable to obtain recourse to ensure the fundamental safety of on-chain assets.

On-chain Security vs. Off-chain Risk Comparison:

On-chain assets: Cryptographic protection, ensuring that even a 51% attack cannot steal them, with mathematical proof ensuring security.

Off-chain activities: Relies on honesty, majority collusion can manipulate results, no cryptographic protection makes it untraceable.

Key Differences: Blockchain Verification vs. Human Trust, Algorithm Execution vs. Social Consensus

Vitalik's warning specifically targets the growing off-chain services in the Ethereum ecosystem. With the development of innovations such as DeFi, oracles, Layer 2, and re-staking, an increasing number of critical functions rely on off-chain execution. While these innovations enhance efficiency and functionality, they also introduce new trust assumptions. Users must understand that when they use these services, they no longer enjoy the absolute security guarantees of purely on-chain transactions.

Off-chain Trust Amplification Risks: Oracles and Re-staking Vulnerabilities

(Source: B2BINPAY)

Why does off-chain trust amplify risks? Traditional blockchain validation requires computers to perform 100 times the original computational work. However, when users transfer funds off-chain through custodial wallets, centralized exchanges, or computations controlled by validators, they forfeit the built-in protections of the blockchain. Off-chain systems lack the independent validation provided by each on-chain node, making them susceptible to manipulation by the majority of validators.

This distinction is important because blockchain consensus operates through algorithmic rules executed without control by any single party. Off-chain activities rely on coordinated behavior and the integrity of validators, but do not depend on protocol-level verification. If the majority colludes to report false information, smart contracts relying on oracle data provided by validators may produce incorrect results, potentially leading to financial losses that on-chain mechanisms cannot prevent or reverse.

For example, DeFi protocols rely on oracle to provide asset price data. If the majority of validators of the oracle collude to provide false prices (for instance, inflating the price of an asset to 10 times its actual price), liquidations and trades based on this erroneous price will be executed automatically on-chain. Although these transactions are technically “valid” (in accordance with the logic of smart contracts), they are based on false data, leading to actual losses for users. Worse still, since these transactions have already been executed and confirmed on-chain, they cannot be rolled back or revoked.

When asked whether his warning mentioned re-staking protocols like EigenLayer, Vitalik confirmed that the platform addresses this vulnerability through a slashing mechanism using its own tokens. EigenLayer allows Ethereum validators to re-stake their ETH to provide security for other services such as oracles, Layer 2, and cross-chain bridges. To prevent malicious behavior by validators, EigenLayer introduces a slashing mechanism: if validators provide false data or violate protocol rules, their staked assets will be forfeited.

This economic penalty system provides a certain level of protection, but it cannot be compared to the cryptographic guarantees that ensure the validity of on-chain blocks against majority attacks. The reduction mechanism relies on the ability to detect and prove malicious behavior, but in many off-chain scenarios, the definition of “malicious” itself is ambiguous. For example, if a oracle validator reports a “wrong but unintentional” price, should this be penalized? How can it be proven whether it was intentional or unintentional? These challenges at the governance and enforcement levels make off-chain security mechanisms far less reliable than the mathematical guarantees on-chain.

The Subtle Balance of Ethereum Privacy Improvements and Security

As Vitalik issued a security warning, Ethereum is pursuing significant privacy improvements that differ from the traditional transparency of the network. Earlier this month, he detailed GKR, a cryptographic technique that validates calculations at a speed 10 times faster than traditional methods, while supporting zero-knowledge proofs, allowing computers to prove that calculations are correct without revealing the underlying data.

The Ethereum Foundation also established a privacy cluster consisting of 47 members in September to make network privacy the default rather than an option, addressing concerns about excessive financial information leakage on public Blockchains. Beyond corporate needs, Vitalik believes this is the only path to global adoption, especially for Ethereum. Recently, industry expert Petro Golovko compared the current Blockchain transparency to the pre-crypto internet era during an interview with Cryptonews, stating that the system of publicly available salaries and account balances remains “unusable for the average person and impossible for institutions.”

The plan aims to achieve private transactions, selective identity disclosure, and improved user privacy experiences, all while not sacrificing the verification mechanisms that prevent validator manipulation. However, the push for privacy brings a clear paradox. Vitalik warns that if transactions become private, how can the network maintain a transparent verification mechanism to prevent off-chain manipulation?

The solution lies in encryption technologies such as GKR, which allow the verification of transaction validity without exposing transaction details, retaining the core security attributes of the Blockchain. Even under majority attacks, invalid Blocks will still be rejected, while protecting sensitive financial data from public view. This “verifiable but invisible” technological breakthrough is the key pathway for Ethereum to address the contradiction between privacy and security.

The GKR (Goldwasser-Kalai-Rothblum) technique represents a significant advancement in the field of zero-knowledge proofs. Traditional zero-knowledge proofs like zk-SNARKs, while capable of protecting privacy, have slower verification speeds and higher computational costs. GKR enhances verification speed by 10 times, making practical implementation possible. This technological breakthrough provides technical feasibility for Ethereum's privacy upgrade, allowing the network to protect user privacy while still maintaining enough transparency to prevent malicious activities.

The privacy cluster of 47 members demonstrates Ethereum's emphasis on privacy issues. This cluster brings together cryptography experts, protocol developers, and application developers, focusing on deeply integrating privacy features into various aspects of Ethereum. From privacy transactions at the protocol level, to anonymous identities at the application level, and privacy protection at the user interface, this is a systematic improvement plan.

The Future Path of Blockchain Security and Privacy

Vitalik's warning and Ethereum's privacy improvement plan together reveal the key challenges in the development of blockchain technology: how to provide privacy while ensuring security. This is not only a technical issue but also a philosophical one. A fully transparent blockchain, while secure, sacrifices user privacy. A fully private system, while protecting users, may provide a breeding ground for criminal activities and regulatory evasion.

The path chosen by Ethereum is “optional privacy”: users can choose whether to use privacy features instead of forcing all transactions to be private. This design protects user choice while also leaving room for regulatory compliance. For ordinary transactions that do not require privacy, users can continue to use the transparent mode. For sensitive financial activities, users can enable the privacy mode. This flexibility may be a key advantage for Ethereum in institutional adoption and regulatory compliance.

From Vitalik's warning, users should conclude that understanding the security model of the services they use is crucial. When you trade directly on the Ethereum blockchain, you enjoy the highest level of security. When using services like oracles, Layer 2, or restaking, you rely on different security assumptions. It is wise to choose an appropriate level of security based on the size of the funds and risk tolerance.