Comprehensive and easy-to-understand analysis of existing L2 environments

introduce

One of the most controversial topics in the blockchain space is undoubtedly scalability.

More specifically, scaling Ethereum has proven to be a challenging but necessary operation; with its growing popularity, requests to include transactions in blocks have increased, resulting in increased transaction costs. The Ethereum mainnet processes about 15 transactions per second, so it seems necessary to increase throughput.

To ease the burden on Ethereum nodes, many solutions have emerged that limit the amount of processing or storage required for the mainnet, each with their own advantages and disadvantages.

Comprehensive and easy-to-understand analysis of existing L2 environments

To increase the speed of the Ethereum network in its actual single-chain configuration, a number of alternative scaling strategies are now being used; they all aim to offload transaction processing from the main Ethereum blockchain to improve scalability, but they do in various ways.

It is worth noting that these scaling techniques are not limited to Ethereum and may be used on other networks as well.

The purpose of today’s article is to introduce the main scaling possibilities in the blockchain ecosystem.

In fact, the existing technology has various consensus algorithms and new implementations, such as sharding methods, which solve the scalability problem directly at the base layer.

As expected and explained in previous reports, sharded chains represent only a small fraction of the current blockchains that have seen a lot of interest in recent months, including DeFi on Harmony One The introduction of Kingdoms and Aurora (Near Protocol’s EVM compatible chains). The main driving force behind the development of these ecosystems is the applications deployed in them, with faster speeds and cheaper gas fees resulting in a better experience for users.

In the family of shard chains, it is possible to find Ethereum 2.0.

In addition, there are sidechains and solutions built on like rollup; this technology inherits all the security and consensus protocols from the main layer, giving them a significant advantage over most other scaling technologies. In this regard, these solutions can be classified as “non-custodial” sidechains.

Essentially, a rollup collects a large number of transactions, computes them off-chain, and broadcasts them as a single on-chain transaction.

There are two types of rollups currently active on the Ethereum mainnet:

  • ZK-Rollup (where Zk stands for zero knowledge), backed by proofs of validity
  • Optimistic, via fraud proofs

Comprehensive and easy-to-understand analysis of existing L2 environments

Before diving into this field, it is necessary to mention what a “zero-knowledge” proof is.

zero-knowledge proof

From its pure definition, Zero Knowledge Proof (ZKP) is a set of tools that can verify information without revealing underlying assumptions.

The expression “zero knowledge” stems from the idea of ​​not providing any (“zero”) information about a particular fact: this is achieved by a set of cryptographic techniques that enable the “prover” without revealing any data , which mathematically indicates to the “verifier” that a computational assertion is valid.

ZKPs have been introduced into the blockchain domain to improve their functionality. Zero-knowledge proofs can be divided into two types: interactive and non-interactive.

  • Interactive ZKPs require the prover to perform a series of activities or actions in order to convince the verifier that they possess certain knowledge. Most of the activities required in an interactive ZKP incorporate mathematical probability ideas.
  • Non-interactive zkp does not require interaction between prover and verifier, otherwise verification might happen later. In this case, such ZKPs require additional computers or software.

All zero-knowledge proofs (interactive or non-interactive) must satisfy three prerequisites:

  • Integrity: If a statement is true, the verifier can verify that the prover holds all necessary inputs.
  • Validity: Assertion cannot be refuted, verifier cannot be persuaded of prover with necessary input.
  • Zero-Knowledge: The verifier has no information other than whether the assertion is true or false. Information and personal data of other parties remain anonymous.

ZK-Rollup

Zero-knowledge Rollups submit all transaction data to the main chain, and they verify transactions using so-called Zk-Snarks.

The crypto tool was launched in 2018 by Vitalik Buterin.

The abbreviation SNARK stands for s uccinct, n on-interactive argument of Knowledge:

  • Brevity means the proof is shorter than the underlying data.
  • The argument of knowledge states that a prover cannot construct a proof that is verified without proper “witnesses” or evidence to prove that what they are proving is true.

Once these proofs of verification are complete and published to the main chain, all transactions contained within are declared final. The processing power required by L2 nodes to construct these proofs is very high because they use cryptographic activities.

Comprehensive and easy-to-understand analysis of existing L2 environments

ZK-rollup merges transactions through relayers (also called operators or validators), who then generate zero-knowledge proofs to prove the authenticity of the transactions. After this, the proof is committed and published on the main layer.

Optimistic Rollup

The basic assumption of Optimistic Rollups is that all processed transactions are valid. In fact, the name comes from the optimistic state of the node towards the chain.

Whenever a transaction is found to be invalid, a node can challenge the whole batch of transactions that found the erroneous transaction by providing a fraud proof: the underlying system that supports optimism will re-run a batch of transaction rollups (Optimistic Virtual Machine, OVM) on the main chain.

In general, OVM allows transactions on L2 to complete even if they have been rejected as invalid by L1; if a transaction is deemed invalid, the L2 chain resets to the state it was in before the fraudulent transaction was discovered. All subsequent transactions are rendered useless due to fraudulent transactions.

Since this optimistic approach is based on the premise that submitted transactions are always true until proven to be different, it is considered somewhat “trust-based”.

Comprehensive and easy-to-understand analysis of existing L2 environments

If players are given the right incentives in the ecosystem, then this assumption can become reality. However, it is also necessary to take extra precautions in order to prevent the worst. For example, when transferring funds from L2 to L1, Optimism has a 7-day hold to give validators enough time to spot and flag any fraudulent transactions.

Optimism and Arbitrum are the two latest Optimistic Rollups implemented on Ethereum, and they are the most important of their kind. These solutions have received a lot of attention and coverage in the Ethereum community.

Validium

Operates in a similar fashion to ZK-rollup, except that data is kept off-chain. Because transaction data is not published on the blockchain, additional trust assumptions are necessary, as users must trust the operator so that the data can be accessed when needed.

Validium’s off-chain data storage has many benefits, including faster transaction speeds and guaranteed customer privacy, as transactions are not publicly accessible.

However, since the data is kept off-chain, users will not be able to easily show the amount they have available in the smart contract.

Therefore, in order to raise funds, they must obtain data from the relayer and must make assumptions about the availability of the relayer.

To address this, solutions such as StarkWare provide a Data Availability Council (DAC) that stores all off-chain data and makes it publicly accessible in emergencies, enabling users to reduce their reliance on these relayers. Because they are still using zero-knowledge proofs, there is no danger of propagating false states; instead, all the user must trust at this point is the timeliness of the information.

Validium solutions are relatively recent as they build on the foundation laid by ZK-rollup, and they may gain momentum if proof-of-validity suites of extended solutions become more popular.

Validium’s projects include DeversiFi, ZKSwap (payment and trading platform), Sorare (football NFT game), and Immutable X (NFT marketplace).

Plasma

Within the Plasma family, you can find several blockchains that basically replicate Ethereum, connected to Ethereum via a trust-minimized bridge architecture. Each Plasma chain can adopt its own transaction verification process, but the Ethereum blockchain remains the ultimate authority for truth.

Plasma users do not need to have confidence in the operator and there is always a chance to get their cash back, even if the operator is dishonest or gets in the way. While the release of Plasma has generated a lot of interest in the Ethereum community, it has also brought some challenges: a mix of cyberattacks on the availability of new data, requiring users to monitor transactions to detect malicious behavior, and the need to avoid Plasma if a large number of users try to exit Plasma at the same time. The volume of data on the main chain can slow the adoption of Plasma-based systems.

Additionally, many Plasma designs have been plagued by a range of user experience and security issues that do not facilitate smart contract development. For example, OMG and Polygon have now dropped Plasma, leading some to think it’s dead.

Compare

So far, Optimistic Rollups has received the most attention and acceptance due to its feature that allows developers to “copy and paste” their Ethereum applications onto the L2 platform.

Leading Ethereum mainnet applications, such as Uniswap and Synthetix, have started deploying their applications using the Optimistic Rollups solution based on the Probabilistic Rollups solution. Similarly, ZK-rollup and Validium solutions, while currently offering very limited support for generic smart contracts, are still actively implemented.

A major advantage of ZK-rollup over Optimistic rollup is that there is no exit time. Relayers will not be able to fool the system because zero-knowledge proofs are used to establish the authenticity of transactions.

In general, the development of these initiatives is highly dependent on what they can offer. The future of zero-knowledge proof EVM compatibility is expected to well contribute to the growth of the portfolio of L2 solutions based on proof of validity.

As Matter Labs and StarkWare take the lead in using the accessibility of these proofs by choosing data availability, they will likely outperform Optimistic rollups. The security provided by zero-knowledge proofs, and the difficulty with which relayers can publish malicious activity, make the future of L2 systems looking even brighter for their ability to use them.

Comprehensive and easy-to-understand analysis of existing L2 environments

As of today, the total value locked in the entire L2 space is around $6 billion.

As you can see from the chart below, we’ve got updated data from the portal L2Beat, which highlights how Optimistic Rollups maintains a market-leading position with 70% of the total market value, with Arbitrum taking the top spot with $3.1 billion . dYdX, an L2 app using ZK-Rollup, came in second with a value of $995 million. So far, Validium offers a lower TVL, which looks promising with the advent of IMX and Sorare.

Comprehensive and easy-to-understand analysis of existing L2 environments

in conclusion

The use of rollup is expected to be the most common scaling method going forward. Considering the release of fully functional Ethereum 2.0 is still a long time away, they will likely be around for a long time.

Composability is a key element of Ethereum that enables anyone in the network to easily build new use cases on or around existing assets.

In fact, if you are a user of the Ethereum network, this gives you a lot of freedom; you can do relatively complex transactions under the same security framework, and on the same chain, through some user-friendly activities .

While L2 solutions clearly improve the user experience by reducing fees, they also offer the option of a standalone execution environment.

Recently, there has been a lot of indecision on the implementation side as application developers wait to see which L2 solution is popular before choosing which platform to deploy on.

Integration between one or several L2s will be a key development in the future. It has implications not only for network effects across the Ethereum ecosystem, but also for the broader smart contract platform environment.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/comprehensive-and-easy-to-understand-analysis-of-existing-l2-environments/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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