The VSCode extension displays compiler warnings and errors inline within the editor. It does this by a pipeline that takes Solidity file edits and passes them to Solc, turning any returned warnings or errors into VSCode diagnostics.

The current validation pipeline is based on the Hardhat v2 build system.

It is expected that we will need a validation pipeline that leverages the new Hardhat v3 build system, to enable support in the VSCode extension the new Solidity import resolution rules of Hardhat v3.

It is likely that we will need to keep the previous pipeline for v2 and switch depending on project type.

It is an open question whether none Hardhat projects will use the v2 or v3 validation pipeline.