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2 years ago
By Andreas Freund, EEA Mainnet Interest Group Member
The pursuing is simply a existent authorities of the Ethereum scalability ecosystem mini report, which is longer and much successful extent than a emblematic blog post.
Many enterprises person abandoned backstage Blockchain consortia owed to respective factors: the lack of meaningful web effects successful backstage Blockchain implementations – which thin to marque them much costly and cumbersome to negociate wrong a consortium of competing entities than a shared database strategy – arsenic good arsenic the deficiency of accessibility of the DeFi ecosystem with its caller and rapidly growing, and, therefore, precise profitable plus classes. Ethereum Layer 2 (L2) scalability solutions connection an accidental to acceptable the quadrate peg of Ethereum Mainnet into the circular spread of endeavor security, privacy, and compliance requirements since galore L2 solutions are de facto centralized databases with clever cryptography. They tin besides supply entree to the satellite of DeFi plus classes, allowing Mainnet web effects to spill implicit to endeavor solutions done those DeFi plus classes. This makes for a new, and symbiotic, narration betwixt endeavor usage cases connected L2 and the Ethereum Mainnet done some plus and idiosyncratic growth.
A Brief Introduction to Layer 2 and different Scalability Solutions for Ethereum
The Ethereum Mainnet has go a unfortunate of its ain occurrence successful that it presently serves arsenic a important bottleneck for the maturation of its ecosystem; web issues person arisen owed to precocious transaction fees and the constricted fig of transactions allowed per block, endangering the economical viability of Ethereum-based protocols, start-ups, and others with dependable concern models. While Eth2, the adjacent mentation of Ethereum, promises a 100x summation successful transaction scalability and importantly reduced transaction fees, its rollout is inactive 12 months oregon much away. Ethereum scalability challenges request to beryllium addressed contiguous if Ethereum wants to clasp its enactment presumption arsenic the astir popular, and astir utilized blockchain web successful the world.
Over the past 2 – 3 years respective types of solutions person emerged that code the scaling and transaction outgo challenges. What they person successful communal is that each execute the dense transaction processing disconnected the Ethereum Mainnet (i.e off-chain) successful assorted forms of centralized oregon decentralized computing environments, portion Mainnet is utilized arsenic the information and information integrity anchor successful assorted forms. These solutions are what is colloquially called Layer 2 (L2) due to the fact that they are solutions sitting supra the Ethereum Mainnet, besides often referred to arsenic Layer 1.
Below is simply a little overview of the large scalability solution categories followed by a little statement of the characteristics of each solution category:
- State Channels
- Sidechains
- Rollups
- Optimistic Rollups
- Zero-Knowledge (zk) Rollups
- Plasma
- Validium
Figure 1: L2 Categorizations; Source: Token Terminal
State Channels
State channels standard the Ethereum Mainnet by performing transactions off-chain via unafraid channels established betwixt parties. They necessitate a idiosyncratic to deposit a snapshot of the latest Ethereum authorities that the idiosyncratic controls into a multi-signature astute contract; this is analogous to idiosyncratic deposits into outgo channels connected Bitcoin’s Lightning Network. This snapshot volition incorporate important information specified arsenic the ETH holdings of an Ethereum code astatine a fixed time.
State Channels let for (nearly) escaped off-chain transactions with instant transaction finality and superior privateness due to the fact that lone the authorities transmission relation and participants successful the authorities transmission person visibility into the off-chain transactions. Think of a chess crippled wherever players spot an ante to commencement the game. This transaction would beryllium recorded on-chain and opens a channel. Individual moves would beryllium signed by each subordinate wrong the channel. The crippled would proceed until a subordinate leaves oregon the crippled ends, astatine which constituent 1 of the players oregon the crippled itself would entreaty to Mainnet for a ruling and payout of the winnings.
State channels are apt to service successful situations wherever determination are precocious postulation peer-to-peer multi-directional transactions among reasonably trusted parties. Individual authorities changes volition instrumentality spot wrong these channels via signed and unafraid transactions, with the Mainnet oregon L2 consensus-based contracts serving to grip periodic and/or “end-game” reconciliation.
Sidechains
Sidechains are blockchains autarkic of the Ethereum Mainnet with their ain statement models, e.g., Proof of Authority (PoA), Proof of Stake (PoS), and authorities instrumentality mechanisms specified arsenic the Ethereum Virtual Machine oregon different architectures. Ethereum transactions tin beryllium offloaded to specified a concatenation successful a custodial manner, decreasing the load connected the Ethereum Mainnet. Depending connected the web attack with respect to chains (independent multi-chain vs shared chains), transaction privateness tin perchance beryllium preserved via gated entree to a chain.
The peculiar attack each web takes indispensable beryllium evaluated connected its ain to find suitability with respect to scalability, security, and fittingness for purpose. Some ecosystem participants bash not see sidechains to beryllium existent L2 solutions arsenic they neither inherit capable information assurances of Ethereum Mainnet owed to a deficiency of onchain transaction information nor supply the quality to arbitrate disputes connected the Ethereum Mainnet. Proponents of Eth-connected chain-based networks volition reason that their Proof of Stake statement models and validator models are arsenic rigorous arsenic Eth2 (which besides uses a Proof of Stake model) and that their operational ties with Ethereum (in the signifier of web contracts moving connected Ethereum) supply capable information and transparency successful an Eth-native form.
We volition outline assorted chain-based approaches beneath erstwhile we survey the scalability landscape.
Rollups
Rollups are akin to advanced, non-custodial sidechains that execute precocious transaction throughput portion inheriting the information assurances of the Ethereum Mainnet. Rollups typically autumn into 1 of 4 main categories: Optimistic rollups, zk-Rollups, Plasma, and Validium.
Rollups are solutions that execute transaction execution extracurricular the main Ethereum chain, but station transaction information connected Layer 1. As transaction information is connected Layer 1, this allows rollups to beryllium secured by Layer 1. Inheriting astir information properties of Layer 1, portion performing execution extracurricular of Layer 1, is simply a defining diagnostic of rollups.
Three simplified properties of rollups are
- Transaction execution extracurricular Layer 1
- Data oregon impervious of transactions is connected Layer 1
- A rollup astute declaration successful Layer 1 that tin enforce close transaction execution connected furniture 2 by utilizing the transaction information connected Layer 1
Some rollups necessitate “operators” to involvement a enslaved successful the rollup contract. This incentivizes operators to verify and execute transactions correctly. (Layer 2 Rollups, Ethereum.org, https://ethereum.org/nb/developers/docs/scaling/layer-2-rollups/)
However, “Operators” person the powerfulness to censor transactions, if the operator-model is not sufficiently decentralized arsenic Mainnet is. The fig beneath organizes those categories depending connected whether they grip information retention on-chain oregon off-chain, and whether computational correctness is enforced done zero-knowledge validity proofs oregon user-deposit-slashing fraud proofs.
Figure 2: L2 Rollup Categories; Source: buildblockchain.tech
Another differentiation betwixt rollup solutions is with respect to wherever computation takes spot and erstwhile finality occurs. For example, the computation for ZK Validity Proofs takes spot via a third-party relation (or validator, oregon sequencer) whose superior relation is to bundle transactions and taxable batches of transactions to the Mainnet. These batches incorporate minimal but capable accusation to beryllium the validity of the transactions. The computation of the transactions is handled anterior to submission to L1 and finality occurs erstwhile validated by the L1 (or aft the transition of capable L1 blocks arsenic the rollup mightiness dictate).
Optimistic Rollups besides compute the transactions off-chain arsenic zk-rollups but not successful zero-knowledge and they trust connected a contention process and contention play wrong which to abrogate to the Mainnet the determination arsenic to whether a contested transaction is valid oregon not. As with ZK Validity Proofs, operators of Optimistic Rollups are apt to involvement oregon beryllium bonded specified that if an relation submits a fraudulent transaction to the main Ethereum chain, their involvement is slashed.
Note that Rollups commonly bash not connection privateness to their users. However, caller solutions are emerging, some Optimistic (zk Optimistic) and zk Rollups (zk-zk Rollup), that bash sphere the privateness of their users. These solutions volition beryllium discussed successful the adjacent section. Also, enactment that zk-Optimistic Rollups person worse show characteristics than Optimistic Rollups due to the fact that each transaction successful the rollup artifact is overmuch larger than successful the lawsuit of Optimistic Rollups, and Ethereum blocks are space-constrained done the artifact state limit; a trade-off betwixt privateness and performance. On the different hand, zk-zk Rollups person akin show characteristics arsenic zk Rollups due to the fact that of a clever usage of cryptography that allows the usage of recursive zk proofs which avoids adding much information to a rollup block. Further optimizations successful the utilized cryptography debar an summation successful the compute show requirements compared to zk Rollups.
The supra L2 solutions person circumstantial performance, security, economic, and usability diagnostic which are summarized successful the array below:
Figure 3: L2 Solution Characteristics by L2 and Scalability Solution Category;
Source: Matter Labs
Given the accelerated changes and optimizations of the employed technologies, the supra appraisal of the antithetic categories is simply a snapshot successful clip and could – and is expected to – alteration substantially implicit the adjacent 12 to 24 months.
Ethereum Layer 2 and Scalability Solutions Landscape
As already stated, the Ethereum L2 ecosystem is evolving astatine warp velocity — from the Plasma Whitepaper successful 2017 to Ethereum’s largest decentralized exchange, Uniswap, going unrecorded connected an L2 solution successful 2021. Hence, immoderate overview of the ecosystem volition beryllium some incomplete and rapidly outdated. However, a existent snapshot is inactive utile to recognize the large assortment of projects successful the space, and their intended usage cases.
We volition sermon each class and springiness 1 oregon much examples successful much item and notation additional, notable projects successful the aforesaid class with links to their websites oregon Github repositories if they exist.
State Channels
Connext: Connext is simply a authorities channels task that has designs connected being an L2 solution not lone for Ethereum but besides a cross-chain routing hub for Ethereum’s galore L2 solutions. The task is attempting to code a interest successful the Ethereum assemblage that Eth-based L2 projects volition not beryllium sufficiently interoperable. Connext’s caller cross-L2 transportation strategy could beryllium important to guarantee that interconnectivity betwixt solutions volition beryllium readily available, avoiding web lock-in wrong immoderate 1 scalability solution.
Other notable projects are the Raiden Network, Celer, and Perun.
Sidechains
xDai Chain: xDai Chain is an EVM-based sidechain designed to stably facilitate larger transaction volumes; presently astatine astir 70 transactions per 2nd (TPS). The task is built astir its STAKE token, which statement providers involvement to economically unafraid the sidechain. Because of its efficiency, xDai Chain has been precocious increasing successful popularity.
POA Network: Similar to xDai Chain astatine ~ 70 TPS, the POA Network is an EVM-based sidechain that relies connected a acceptable of trusted statement providers to process transactions rapidly and cheaply. The solution seems to beryllium usable for astir immoderate usage lawsuit from blockchain games to assemblage currencies.
Polygon PoS: Polygon is simply a exertion model and protocol that enables developers to deploy and link done a messaging protocol antithetic types of networks — EVM-based Proof-of-Stake chains, Plasma chains, etc. — with each different and Ethereum. Therefore, the purpose is akin to Connext, oregon non-Ethereum based frameworks specified as Cosmos. Polygon PoS is Polygon’s sidechain solution. The Polygon token is utilized arsenic a staking token connected the antithetic networks that are deployed successful the Polygon web of chains to economically unafraid the statement providers. The attack and architecture are akin to the substrate and parachain attack of Polkadot.
Skale: Skale’s Elastic Blockchain Network is an Ethereum compatible POS sidechain solution that tin rapidly rotation up application-specific sidechain instances. Validators for each sidechain are selected arsenic a random, periodically shuffled subset of the full SKALE validator pool, which is incentivized by staking a token. Validators are managed and shuffled by an exertion that runs connected Ethereum Mainnet.
Another notable sidechain is the Loom Network.
Optimistic Rollups
Optimism: Optimism is an Optimistic Rollup implementation enabling astir 100x simplification successful state utilization that is gaining immoderate aboriginal traction among immoderate large DeFi players, specified arsenic Synthetix. Optimism has built the OVM, an L2-based EVM specified that L1 projects tin redeploy their Solidity oregon Vyper astute contracts connected Optimism.
Notable projects migrating to Optimism: Uniswap, Compound, Synthetix
Fuel: Fuel was the archetypal Optimistic Rollup implementation connected Ethereum Mainnet, going unrecorded connected Dec. 31st, 2020. Fuel promises accelerated and businesslike token payments, wanting to go the “Earth’s worth speech layer.”
Arbitrum: Similar to Optimism, Arbitrum, developed by Offchain Labs is an optimistic rollup web with validators economically staked successful Ether, susceptible of processing astatine astir 100x state reduction. The main quality betwixt Optimism and Arbitrum is that Solidity and Vyper astute contracts volition beryllium capable to beryllium deployed onto Arbitrum without immoderate modifications due to the fact that the Arbitrum Virtual Machine is the aforesaid arsenic the EVM astatine the bytecode level.
Notable projects migrating to Arbitrum: Reddit, Uniswap
Cartesi Descartes: Cartesi’s Descartes Rollups is simply a variant of optimistic rollups with interactive quality resolution, akin to Truebit. Instead of EVM bytecode, Descartes executes the RISC-V acquisition set, which allows it to tally a Linux VM.
Other notable Optimistic rollup projects are OMGX from the OMG Network, and Nightfall V3 from Ernst & Young, a privacy-preserving Optimistic Rollup wherever the rollup transactions are zk-snark proofs to sphere transaction privacy, which leads to reduced TPS owed to the size of the proofs.
zk-Rollups
zkSync: zkSync is simply a zk-Rollup solution from Matter Labs that uses zero-knowledge proofs from zk-snarks to recognize some precocious throughput (~ 300 – 2,000 tps based connected the fig of transactions successful a block) and precocious information (inheriting Ethereum Mainnet information assurances). Matter Labs is besides moving connected a Validium benignant solution called zkPorter.
Notable projects connected zkSync: Curve, Gitcoin, Balancer, Argent
Loopring: Loopring was the archetypal zk-rollup deployed to Ethereum Mainnet, and has been operating connected Ethereum Mainnet for implicit 1 year. Loopring’s zk-Rollup solution is presently focused connected scaling decentralized exchanges with Automated Market Makers and Order books, and payments. The Loopring Exchange and Loopring Wallet are based connected Loopring’s technology. OpenOcean has present besides migrated to Loopring.
Aztec: Aztec precocious launched zk.money, which allows for afloat backstage Ether/DAI transactions. Zk.money is simply a zk-zk Rollup which is the adjacent procreation of zk Rollups. The Aztec exertion allows verifying zk proofs of zk-proofs of backstage transactions; successful different words, recursive zk proofs, connected the Ethereum Mainnet. Because of the recursive quality of the zk proofs, the aforesaid fig of transactions arsenic regular zk Rollups tin beryllium placed connected the Ethereum Mainnet.
This signifier of zk Rollup seems to beryllium the astir promising attack for galore endeavor usage cases fixed their beardown privateness requirements.
Other notable zk Rollups are the Hermez Network (recently acquired by Polygon) and zkSwap.
Validium
StarkEx: StarkEx is akin to zk Rollups but uses zk-starks alternatively of zk-snarks, with the main quality being that the zk proofs are importantly larger than the proofs for zk-snarks, and are truthful some much costly to deposit and to verify than for zk-snarks. The strategy tin tally either arsenic a Validium-type strategy oregon a zk-rollup. This dynamic allows the task to person higher throughput capabilities compared to axenic zk Rollup systems. Current implementation are utilizing the Validium-type implementation.
Notable projects utilizing StarkEx: dYdX, DeversiFi, Paraswap, Immutable X
Plasma
OMG: The OMG Plasma Network, is akin to OMGX but is built connected the Plasma architecture, alternatively of an Optimistic Rollup.
Polygon: Polygon has besides released a mentation of its Polygon sidechain discussed supra arsenic a Plasma concatenation which tin speech messages with different sidechains and rollups arsenic discussed for the Polygon Proof-of-Stake sidechain.
Another notable Plasma concatenation is the Leap DAO.
What does this mean for Enterprises?
Enterprises person traditionally not been acrophobic with nationalist Blockchains due to the fact that security, privacy, and compliance requirements of Enterprise Use Cases person made nationalist Blockchains not suitable for implementation. However, the outcomes of backstage Blockchain networks person been mixed to disappointing for respective reasons. Chief among them, the lack of meaningful web effects successful backstage Blockchain implementations, which thin to marque them much costly and cumbersome to negociate wrong a consortium of competing entities than a shared database system, and the deficiency of accessibility of the DeFi ecosystem with its caller and rapidly growing, and, therefore, precise profitable plus classes from a backstage Blockchain. The L2 scalability solutions discussed connection an accidental to not lone acceptable the quadrate peg of Ethereum Mainnet into the circular spread of endeavor security, privacy, and compliance requirements since galore L2 solutions are defacto centralized databases with clever cryptography but besides entree the satellite of DeFi plus classes allowing Mainnet web effects to spill implicit to endeavor solutions done those DeFi plus classes. This makes for a new, and symbiotic, narration betwixt endeavor usage cases connected L2 with the Ethereum Mainnet done some plus and idiosyncratic growth.
In the adjacent installment of this blog series, we volition dive deeper into caller and breathtaking endeavor usage cases for L2 solutions leveraging Ethereum Mainnet’s information assurances and vibrant ecosystem.
Until then, enactment up to day connected everything EEA by pursuing america connected Twitter, LinkedIn, and Facebook.
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