As blockchains such as Ethereum continue to expand, Layer 2 (or L2) solutions provide opportunities for millions of new users.
There are countless options currently available. The most promising L2 solutions are so-called Rollups, such as Arbitrum, Optimism, StarkNet, and zkSync, to name a few. These vertical "mini-blockchains" have very similar security properties extending from the Ethereum mainnet. What they have in common is:
Cheaper transaction fees (low gas) faster throughput Trustless Proof Mechanism Rollups execute transactions in a new environment (i.e. off-chain) and bundle them together, then send updated state and transaction data back to Ethereum. They use proofs to achieve security - some solutions use mathematical validity proofs, applying techniques from zero-knowledge cryptography, while others use game theory and staking value for fraud proofs.
In other words, Rollup is a bridge to off-chain state machines. The updated state performed on the Rollup is then published to Layer 1 (or L1) and verified using a validity or fraud prevention scheme in the verification contract.
In this post, we expand on our four main questions to industry leaders who are building, researching, and growing L2.
What are the key trends in blockchain scaling in 2022? Will L2 surpass sidechain/alternative L1 Total Value Locked (TVL) in 2022? Which plan will come out of the shell in 2022? Which won't? As a new developer, should I choose to learn Optimistic or ZK rollups? why? Please note that these responses are their personal opinions and do not necessarily reflect the opinions of their entire organization.
How does Optimistic Rollup work? In Optimistic Rollup, the operator commits state transitions to L1, batching all transaction data together with the state transitions. State transitions are assumed to be correct unless proven incorrect. With the given data, anyone can check it. If someone can prove the operator's fraudulent behavior, the operator's deposit will be slashed, and the prover will be rewarded.
After a predefined period of time, if no one is willing or able to make a fraud proof, the state transition is accepted on L1 and considered a final state. This fraud window defines the withdrawal delay before anyone can withdraw assets from Rollup.
The two main players in Optimistic Rollup include Arbitrum and Optimism, which have a 7-day waiting period for withdrawals.
How Does Effectiveness Rollup Work? In a validity rollup or ZK rollup, the operator submits a zero-knowledge proof of state transitions to L1 along with some transaction data. Zero-knowledge proofs of state transitions - which are difficult to create but relatively easy to verify - can be verified in L1's verification contract. The proof shows that the state transition is correct.
Different zero-knowledge schemes are used - SNARKS and STARKS - which have slightly different properties and gas usage. Validity Rollup has almost no withdrawal delay, because the state transition is mathematically proven correct, so the current state is always valid.
Two well-known teams using proofs of validity include Matter Labs (which builds zkSync) and StarkWare (which powers dYdX, Immutable X, and more).
Dive into L222 While industry buzzwords are dynamic in the crypto environment, some of them will continue to exist. While these L2 scaling ecosystems are still young and have a lot of work to do, 2022 will be the L222 year for the Ethereum ecosystem as these different networks take off and gain traction. Ethereum's high gas will continue to drive L2 development.
As these teams continue to work on gas optimizations, user experience, development tools, and network constraints, they will begin to attract a lot of developer attention that will strengthen the entire Ethereum ecosystem.
The numbers and statistics provide a snapshot of the current state and addressable market for L2 solutions. Time will tell if the market will value more expensive security measures.
Currently, the five largest Rollups receive $5.51 billion in TVL, tokens that can be used in these systems. This is a relatively small amount compared to the value locked in alternative L1s like Polygon PoS (>$5B) or BSC (>$13B).
Also in terms of usage (e.g. measured by the number of daily transactions), the most commonly used L2 dYdX has around 200,000 transactions, a tenth of Polygon PoS's around 3 million transactions.
However, we believe it is easier to achieve high value lock-in or day-to-day transaction use than Ethereum-like security. So even today, L2 seems to be used by only a small percentage of users, we will see more and more use and value growth of L2 as technology improves.
Maybe put it another way: the difference between L1 and L2 is that in L2 you pay extra for the privilege of a completely trustless off-chain system. We don't know if users will pay extra to remove this trust.
The best way to learn about L222 is to connect with those who are in it. We gathered their views on four key points from research experts, L2 team founders, and blockchain engineers.
Key trends for expansion in 2022
In terms of expansion, we have identified four main themes for 2022.
There is no denying that 2022 will be the year of the bridge. This could mean two things, as Rollup is essentially a bridge that protects user funds in a specific way. On the other hand, there are bridge protocols that allow interoperability between different Rollups.
Infura researcher Patrick McCorry believes that “transferring funds across Rollups without interacting with Ethereum should eventually become seamless.” However, a trustless and decentralized bridge protocol for interoperability is still missing.
Optimism Chief Scientist Ben Jones predicts: “We will be very good at moving ERC20 assets between these chains, and we will start to see the development of generic messaging and other application-specific bridges to non-simple ERC20.”
In addition, the merger of Ethereum with proof-of-stake (PoS) will happen , and “the narrative that mainnet is used for finality and L2 is used for computation will continue to build,” said Faina Shalts of Truffle Suite. The merge itself will not have much impact on the rollup as it will only change the L1 consensus layer.
However, danksharding, which is likely to be followed next, will have a huge impact, although most likely not in 2022. As Polynya puts it, “Danksharding turns Ethereum into a unified settlement and data availability layer”.
Another major trend we'll see is lower fees . So far, specialized zk rollups are generally cheaper than Optimistic rollups. (It is unclear how expensive a generic zk rollup per transaction is). Peter Robinson of ConsenSys asked, "Can Optimistic Rollup reduce costs?" There are ways to reduce costs, and their team is working to optimize the compression technique.
Recall that Angela Lu from Matter Labs mentioned, “Ironically, the timeline for Optimistic Rollup [last year] was overly optimistic, building EVM-compatible sidechains was much simpler, and the fees were an order of magnitude lower, resulting in satisfied the market.”
As a trend, we may also see "low fees are what users care about right now". Maybe even more concerned than decentralization, shared by Ankit Maity from Polygon.
The last trend the experts spotted was about developers . As a trend, Faina Shalts sees developers writing L2 native protocols rather than just porting from existing L1 Solidity code. Professional L2 smart contract developers might use Cairo or Zink coding.
More specifically, Angela Lu believes that with the rise of L2-native applications and blockchain use cases that cannot be built within the constraints of the Ethereum mainnet, there will be vertical innovation [Rollup technology innovation].
Will L2 overtake sidechains/replace L1's TVL in 2022?
Overtaking all sidechains and replacing L1 in 2022 seems unlikely.
Faina Shalts said: “Ethereum’s security and decentralization are attractive to developers and longtimers in the space, but at least some L1s will continue to take the lead.”
"This is the year of Optimistic Rollup adoption," said Ankit Maity, although he doesn't believe they're ready for the next billion users.
According to Ben Jones, in terms of TVL and volume, a number of factors will have an upward impact on L2:
Gas costs are further optimized and cheaper People are aware of safety issues Ordinary users gain trust in these L2 systems, which are inherently harder to build due to their various proof mechanisms While we may see an increase in TVL on L2 in 2022, we also need to see easy-to-use, accessible, and inexpensive cross-chain bridges for capital to move from alternative L1.
Angela Lu said: “In the long run, TVL will tend to be a chain that provides more security and decentralization and application innovation at a reasonable cost.
While we fully believe in our design, the 2022 timeline for a full L2 takeover is rather aggressive, as we encourage users not to move large amounts of money into any L2 until it has been fully battle-tested on mainnet. "
As far as she's concerned, it's important to remember that these L2s are early technology and therefore not safe to use. L2Beat has a detailed risk summary for each Rollup that you can view:
All in all, the complete homogenization of blockchain does not seem realistic. Many alternatives to L1 such as Solana and Binance Smart Chain are cheaper but less secure - occupying a significant market cap. Some transactions don't need to be as secure as others, and some may not even care about decentralization, just cheaper fees and faster transactions.
Large-scale malicious attacks on these networks could alert people to security risks and prompt migration. Remember last week's Wormhole cross-chain bridge event at solana?
Although perhaps we should pay attention to Patrick McCorry's stance of not worrying about L2 taking over sidechains, but to see if L2 can flip TVL held by a centralized exchange like Coinbase.
Which plan will break in 2022? Which won't?
When it comes to unsolved puzzles in 2022, almost all experts are talking about EVM equivalence.
For Optimistic rollups, we will see them gain traction in terms of usage and tooling, as they are almost equivalent to EVM.
“We’re seeing a huge number of people deploying their projects because they realize it’s actually as simple as changing the chainID and running the exact same script that you do on mainnet,” observed Ben Jones. However, as different EVM-compliant scaling solutions go into production, users and developers will become more aware of the nuances of compatibility and the costs associated with them.
However, for zk rollup, the expectation for it falls on continuity. Some experts conservatively predict that we will see a good workaround for converting code to EVM. Some believe that a zkEVM proof-of-concept is feasible in 2022. Some even think we will see efficient zkEVM provers on mainnet.
What we won't see in 2022 is trustless and seamless interoperability between L2s - it's essentially bridging. There are some protocols and some teams build on them. To date, most bridge projects are indeed trusted and centralized.
As a new developer, should I choose to learn Optimistic Rollup or zkRollups? why?
If you are a new developer, don't worry. The consensus here is to learn Solidity and EVM.
"Solidity is a smart contract language with the richest developer tutorials, the most mature developer tools, and the largest developer community to support one person's smart contract development journey," Angela Lu said.
As a new developer, you probably want to be able to do things quickly and build intuition. The developer experience with Ethereum has improved significantly over the past three years, and by learning Ethereum, you will have the foundation you need to build EVM-compatible Optimistic Rollups, which doesn't apply to zk rollups.
"zk Rollup currently requires knowledge of a different language that is optimized for the computations needed to make it work. For example, to really get the benefits that Starknet promises, you need to know Cairo. This year is definitely the best time to learn it , because the language is so new that junior developers can quickly develop expertise.
We will no doubt see the roles of "Cairo Smart Contract Developer" and "Zinc Smart Contract Developer" soon. It's risky to focus on one or the other, as both major zk Rollups are expected to eventually be EVM compatible, but I think learning one or the other is a good reward/risk calculation!
Warning - there are not as many resources for learning Cairo or Zinc as there are for learning Solidity, so they will be harder to learn over time," Faina Shalts said.
As a new developer, you may now want to avoid jumping into an esoteric programming language, which can be prone to extreme changes and possible bugs, as that would be a more challenging route. However, the team at StarkWare encourages developers to get acquainted with the idea that "each marginal transaction reduces the unit transaction cost, removes the gas limit that existed on L1, and opens up a world of new features."
Depending on your experience level, you may want to explore zk rollup to deploy L2 native applications. According to Angela Lu of Matter Labs, this allows for greater design space because:
Fast L1 <> L2 asynchronous messaging enables applications leveraging L1 and hybrid applications with fluidity Volition is designed to enable disparate classes of users and applications across the entire security/cost spectrum to combine and interoperate in a system that spans many data availability solutions The ability to publish only state differences to calldata would save a lot of cost over Optimistic rollup. Nicolas Liochon, head of R&D at ConsenSys, emphasized that as a new project and developer, "A reasonable plan, anyway, is to evaluate the properties of zk Rollup and Optimistic Rollup to see if Optimistic Rollup is good enough, at least in the short term, and then wait to let the The dust settles on the zk-evm debate."
The blockchain trilemma disappears The blockchain trilemma refers to the widely held view that a decentralized network can only provide two of three benefits in terms of decentralization, security, and scalability at any given time.
The Blockchain Trilemma: The Triangle with Decentralization, Scalable, and Secure Points.
Rollup is a modular implementation designed to solve the trilemma. By creating a transaction execution environment separate from Ethereum, they are freed from the responsibility for consensus and data availability. This allows Rollup to benefit from high scalability, security, and decentralization without affecting either.
final thoughts All in all, the key trends in scaling we'll see in 2022 include bridges, fee reductions, mergers, and developer migrations. While there will be significant progress in EVM compatibility and EVM equivalence this year, we won't see L2 overtake L1 in TVL anytime soon.
Trustless and seamless bridging will take more time to mature as it is a challenging puzzle. If you're a developer looking to get into the field, start by learning Solidity!
Ideally, new users don't even need to know they're on L2. It will be a seamless experience and they will not need to go back to mainnet while still inheriting its security. The popularity of bridges, mature L2 infrastructure and fiat currency on-ramp will contribute to developer attention and user appeal.
Hopefully soon, most people will be using this technology without knowing what L2 or EVM means. Until then, we strive to be at the top of the ecosystem and keep up with developments built and researched by many skilled and interesting people.