Ethereum’s EEZ and the attempt to rebuild one Ethereum

Ethereum builders are pushing a caller mode to unify the ecosystem aft years of fragmentation caused by the precise networks designed to standard it.

On Sunday, seasoned Ethereum builder Gnosis and zero-knowledge virtual instrumentality task Zisk unveiled the Ethereum Economic Zone (EEZ), a model aimed astatine linking layer-2 rollups much tightly to the basal network.

The connection positions Ethereum arsenic the cardinal hub, with Ether (ETH) remaining the state token and colony layer. It besides introduces a exemplary wherever astute contracts tin interact crossed mainnet and EEZ rollups with atomic execution.

The inaugural comes arsenic Ethereum reassesses its rollup-centric roadmap. After pushing enactment to layer-2 networks, overmuch of the economical worth shifted distant from the basal layer. Rollups trust connected Ethereum for information and last settlement, but successful practice, extremity up capturing idiosyncratic fees and revenue, a narration immoderate critics person described arsenic “parasitic.”

Similar attempts to unify fragmented blockchain ecosystems person been tried before, with mixed results.

The Ethereum Economic Zone is the latest to reply to the network’s liquidity fragmentation problem. Source: Ethereum Economic Zone

Ethereum’s fragmentation problem

In the latest crypto bull run, ETH show disappointed galore of its holders. It set a caller all-time high adjacent $5,000 past August, but it was lone a marginal leap from its erstwhile peak. It couldn’t support up with Bitcoin (BTC), which flew higher than $120,000.

Many attributed Ethereum’s weaker performance to liquidity fragmentation and the overflow of layer-2 networks. On Tuesday, 23 rollups collectively secured $30.77 billion, according to L2BEAT.

Roughly a 4th of that worth has been bridged from Ethereum’s basal layer, portion much than 45% originated from outer blockchains. Source: L2BEAT

Related: Why institutions inactive similar Ethereum contempt faster blockchains

“Ethereum doesn't person a scaling problem. It has a fragmentation problem,” Friederike Ernst, co-founder of Gnosis, said successful a connection shared with Cointelegraph. “Every caller L2 that launches with its ain liquidity excavation and its ain span is different walled garden.” 

She added:

In practice, that liquidity remains mostly siloed connected idiosyncratic rollups, each with its ain DeFi ecosystem. The effect resembles a postulation of parallel economies alternatively than a unified market. 

Bankless co-founder Ryan Sean Adams compared the existent authorities of Ethereum and its L2s to the North Atlantic Treaty Organization (NATO), describing it arsenic a “loose confederation of chains that opt successful to shared security.”

The EEZ would displacement that operation person to a federated economical national of chains — akin to the US and its 50 states — without requiring a hard fork.

“I hadn't seen overmuch question connected this imaginativeness until now,” said Adams.

Bankless co-founder said EEZ could let Ethereum to present connected its promise. Source: Ryan Sean Adams

The connection chiefly impacts 3 groups. First, for Ethereum, it could amended liquidity circulation crossed the ecosystem by reducing reliance connected bridges, which stay a large onslaught aboveground arsenic funds are locked successful contracts and exposed to exploits. 

Second, for users, EEZ aims to alteration seamless question betwixt Ethereum and its rollups by reducing friction and outgo of moving assets. Users tin bash truthful without the request for changeless bridging.

Finally, for protocols, it removes the request to negociate bridges, wrapped assets and chain-specific deployments, simplifying operations crossed the ecosystem, according to the EEZ.

Ethereum isn’t archetypal to effort an “economic zone”

An illustration of an economical portion already exists. The “Atom Economic Zone,” oregon AEZ, was Cosmos’ effort to nexus chains done a hub-and-spoke exemplary built connected “Interchain Security.” Chains could lease information from the Cosmos Hub successful speech for sharing fees and staking rewards with ATOM holders.

The conception drew renewed attraction pursuing the EEZ announcement, with aboriginal Cosmos contributor Zaki Manian noting that a akin thought introduced successful 2023 didn’t find success.

“Most things neglect and truthful the ecosystem inevitably [becomes] littered with corpses of failed projects and this inevitably leads to deficiency of assurance successful the task arsenic a whole,” Manian said.

Blockchain researcher Dankrad Feist questioned however that acquisition applies to Ethereum’s projected economical zone. Manian responded that galore projects gathering wrong the EEZ model are besides apt to “fail.”

“The Atom acquisition is that the broader nationalist volition construe this arsenic a nonaccomplishment of EEZ,” Manian added.

Cosmos is not arsenic large arsenic Ethereum. Source: Zaki Manian, Dankrad Feist

Related: How SocialFi, memecoins and AI pushed Base to the apical of the L2 ladder

Cosmos is not rather Ethereum. It’s a model and a networking layer, and the Cosmos ecosystem is simply a web of sovereign L1 chains.

Meanwhile, Ethereum is simply a layer-1 blockchain that has a wide hierarchy. Ethereum rollups are structurally babelike connected Ethereum for colony and security, aligning their incentives with the basal layer.

Gnosis co-founder Martin Köppelmann pitched successful to Feist and Manian’s treatment by pushing backmost astatine the comparison. He framed EEZ astir synchronous composability and entree to Ethereum’s authorities alternatively than shared information oregon gross models.

The tradeoff is that rollups indispensable travel Ethereum’s occasional concatenation reorganizations, adding complexity, but Köppelmann described those events arsenic infrequent and manageable compared to the benefits.

“So yeah, I americium blessed to stake connected the occurrence of EEZ!” helium added. 

EEZ gains traction arsenic Ethereum rethinks its scaling strategy

Ethereum’s rollup-centric roadmap was wide viewed arsenic indispensable erstwhile it was archetypal introduced and did execute its extremity of easing the network’s congestion. 

That whitethorn person travel astatine a cost. Some marketplace watchers argued it blunted a cardinal terms rally accidental during the past bull cycle. They besides pass that Ether risks losing its presumption arsenic the second-largest cryptocurrency to Tether’s stablecoin, USDt (USDT).

Almost 60% of bettors expect Ether to suffer its number-two spot, up from 17% successful January. Source: Polymarket

It besides follows disapproval from Ethereum co-founder Vitalik Buterin, who said galore L2s person not afloat transitioned to a decentralized model.

“The archetypal imaginativeness of L2s and their relation successful Ethereum nary longer makes sense, and we request a caller path,” Buterin said successful a February X post.

Though Ethereum’s pivot backmost toward scaling the basal furniture is recent, the EEZ has been a agelong clip coming. An aboriginal mentation of the thought was described arsenic an “Ethereum 3.0 vision” by Bankless co-founder Adams aft listening to Köppelmann’s presumption connected autochthonal rollups successful 2024.

The EEZ has gained wide attraction acknowledgment to backing from the Ethereum Foundation and its improvement team, which includes Gnosis, known for gathering the Safe multisig wallet and aboriginal prediction marketplace infrastructure.

The EEZ has yet to uncover cardinal details specified arsenic its method architecture and show benchmarks, but said these volition beryllium published successful the coming weeks.

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