In October 2020, Vitalik Buterin shared his thoughts about a ‘rollup-centric roadmap’ for Ethereum. Looking at projects emerging at the time — Optimism, Arbitrum, zkSync, etc.— he wrote: “The Ethereum ecosystem is likely to be all-in on rollups (plus some plasma and channels) as a scaling strategy for the near and mid-term future.”
Buterin’s prodigious vision has become a reality due to the synergistic relationship between Layer-2 Rollups and Eth2’s enhanced data availability. Rollups are the Holy Grail of Ethereum scalability, potentially solving the scalability trilemma — i.e., blockchains must compromise security or decentralization to achieve scalability.
Two types of Rollups are currently very common: Optimistic and Zero-Knowledge (ZK). But while both methods contribute significantly to Ethereum’s scalability, they have considerable limitations. Therefore, emerging ‘Smart L2’ platforms like Metis innovate ‘Hybrid Rollups’ that combine security and scalability while fostering decentralization.
Experts at Metis, such as Co-Founder and CTO Yuan Su, have found that combining the fast finality of ZK Rollups and the transcendental scalability of Optimistic Rollups enables developer-friendly and secure Ethereum Layer-2 solutions. This is much needed for Web3’s sustainable and long-term adoption.
The case for L2 Rollups
While Bitcoin lays the foundation for an alternative, censorship-resistant, peer-to-peer money, Ethereum’s primary purpose is facilitating decentralized computation. The latter has an immense scope, especially as it provides a user-centric and community-oriented infrastructure for Web3.
However, Ethereum—or any other decentralized computing platform, for that matter — must be scalable to fulfil its role efficiently. It has to process thousands of transactions per second securely. Otherwise, DeFi applications, for instance, can’t compete with their Web2 counterparts like VISA.
On the contrary, Ethereum, like most other Layer-1 blockchains, currently has severe scalability limitations. The network clogs up due to traffic surges, as happened with Cryptokitties in 2017, DeFi in 2020, and NFTs in 2021. Congestion spikes gas fees, making Ethereum practically unusable for most users. This is a tremendous hurdle to mass adoption both for Ethereum and Web3.
Ethereum’s recent transition to a Proof-of-Stake (PoS) consensus model — i.e., The Merge — is said to “set the stage for further scalability upgrades not possible under proof-of-work”. But these ‘upgrades’ cannot happen on Layer-1, for most parts, due to consequent security concerns.
Also Read: The Merge is coming, but will it help Ethereum dominate the world?
Moreover, PoS doesn’t ensure scalability by itself. It requires implementing specific solutions like Sidechains, Plasma Chains, Channels, Validiums, and L2 Rollups. Among these alternatives, Rollups can leverage the underlying L1’s security effectively while increasing transaction speed and throughput at a much lower cost.
How do Optimistic and ZK Rollups work?
Generally, Rollups are smart contracts that relay transaction data and other information between L1s and L2s. The computation happens off-chain—i.e., on the L2—while the L1 only records and stores the hash or cryptographic address for completed transactions.
L2 Rollups work by ‘rolling up’ or batching multiple transactions into a single block before sending them to the L1 for finalization. This reduces the burden on L1s, helping blockchains like Ethereum scale from roughly 15 TPS to 1000-4000 TPS. It also optimizes gas fees and lowers the overall costs for end-users, even during peak traffic.
Optimistic and ZK Rollups adopt the core principle of relaying only critical, rolled-up smart contract data to the L1. However, they have key differences in their approach to validity and finality and the types of ‘proofs’ they use.
As their name suggests, Optimistic Rollups assume all L2 transactions are valid unless someone challenges them. The process requires L1 nodes to submit ‘Fraud Proofs’ for potentially invalid transactions within a fixed timeframe. Unchallenged transactions are finalized when this window expires.
Most Optimistic Rollups, including Optimism and Arbitrum, are EVM-compatible, general-purpose smart contracts. According to Chris Dixon and Arianna Simpson of Andreessen Horowitz (a16z), “…this close adherence to Ethereum development paradigms results in a very easy transition for developers, wallets, and users: no new programming languages, minimal code changes to existing contracts required, and out-of-the-box support for the majority of existing Ethereum tooling.”
ZK Rollups, on the other hand, adopt a more adversarial approach. Instead of assuming L2 transactions as valid, they use Zero-Knowledge Succinct Non-Interactive Argument of Knowledge or zkSNARK-based ‘Validity Proofs’ while publishing them on the L1. This method doesn’t require any challenge window and can achieve near-instant finality. It thus reduces the withdrawal time from days to hours, besides ensuring superior data privacy and integrity.
Also Read: The growing adoption of Ethereum in emerging markets
L2 challenges and the need for hybrid Rollups
Optimistic and ZK Rollups go a long way in scaling Ethereum, but they have limitations. For instance, there’s no guarantee that vigilant L1 nodes will successfully produce fraud proofs to refute invalid transactions published by Optimistic Rollups.
As for ZK Rollups, the development process is still highly complicated for most Web3 developers, which increases the scope for error and hampers contract-level security. Moreover, most existing ZK Rollups have difficulty achieving EVM compatibility, which restricts their accessibility.
However, while Optimistic and ZK Rollups are still restricted in their individual capabilities, innovators like Yuan Su argue that the two approaches ‘can coexist and be unified’ to unlock their full potential. Further research has revealed the possibility of utilizing Optimism’s Cannon framework to integrate MIPS with ZK Proofs for effective EVM equivalence.
Innovating zkMIPS resolves the interoperability crisis facing ZK Rollups. It also eases the development process, enhancing accessibility for Web3 developers and project owners. But even besides that, the framework for Hybrid Rollups adapts a unique Optimistic Data Availability approach.
During his talk at Devconnect AMS, Yuan explained Optimistic Data Availability as a method where it’s optimistically assumed that sequencers will make the data available for verification when required. This enables on-demand rollups which don’t have to roll up to the entire L1 data set all the time, drastically reducing availability costs and latency.
Given the capabilities discussed, Hybrid Rollups can arguably take Ethereum scalability to the next paradigm. Furthermore, open-source innovation and the consequent network effects can inspire other L1s to adopt Hybrid Rollups or similar solutions, ultimately making Web3 more scalable and cost-efficient.
Finally, as Web3 becomes faster, cheaper, and safer, it’ll be more relevant for diverse business cases and applications. This is the key to boosting adoption in the long run and in a sustainable manner. That’s the horizon for L2 Rollups, which can extend further with progressive innovation.
—
Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic
Join our e27 Telegram group, FB community, or like the e27 Facebook page
Image credit: Canva Pro
The post How layer-2 rollups boost Ethereum’s scalability for broader Web3 adoption appeared first on e27.