Why scalability

Laurence from Entropy made some key points about Layer 1 solutions:

  • History of the classic scalability problem. This is the main problem that various L1 and L2 blockchains are trying to solve: having scalability, decentralization and security at the same time. Scalability Trilemma
  • TPS measures and marketing. Context is important when you see advertised parameters like TPS, because they vary widely in different contexts and may not be achievable in reality.
  • Popular blockchains like Ethereum and Bitcoin are much slower than traditional payment systems like Visa. While it is a fact, I think blockchains theoretically have more potential than traditional systems because they have more computing power.
  • Sequential and parallel transaction processing. The simplified systems with sequential ordering of transactions like Ethereum introduce problems like MEV and poor horizontal scaling. Parallel processing can solve them, but it is much more complex.
  • Sharding in Ethereum.
  • The main limitations of the TPS are CPU, bandwidth, and memory.

Layer 2 solutions can be done with different approaches:

  • Plasma
  • State Channels (The Lightning Network on Bitcoin)
  • Sidechains
  • Hybrids
  • Validium
  • Rollups
    • ZKP Rollups
    • Optimistic Rollups

Rollups are the most popular at the moment. They currently have some problems, such as centralized or restricted Sequencers. ZKP rollups and optimistic rollups differ in the process of batch validation. By default, ZKP rollups don’t trust any data sent to the Verifier on L1. Optimistic rollups accept all data by default, but fraud can be detected.

It’s interesting how many ZKP rollups have the “ZK” part in their name, but don’t actually use it. I remember videos I saw on YouTube explaining the difference between SNARKs and zk-SNARKs, and these rollups can use the primer because there’s really no point in “zero-knowledge” privacy at this stage. It is just important to have a succinct proof.

Vitalik Buterin recently wrote a very interesting article about the return of Plasma L2 in light of recent improvements in our understanding of zk-proofs.