Rollup, the expansion artifact of Ethereum Layer 2, has a performance increase of 300 times and will never be "blocked" again?

According to TheBlockCrypto report, the revenue of Ethereum miners reached US$800 million in January, surpassing the historical record three years ago. The previous high was US$762 million in January 2018. And 40% of that, or 311 million US dollars, came from online transaction fees, a record.

Behind the high income of miners is the result of the low performance constraints of Ethereum. At present, the TPS of ETH cannot exceed 25. The proposal of Layer 2, especially the gradual maturity of Optimistic Rollup and ZK Rollup, can increase the performance of Ethereum by more than 300 times, allowing people to see the dawn of off-chain expansion.

Layer 2: Let most things be done in Layer 2, and then through the interaction with Layer 1 can transfer trust to Layer 1.

Layer1: Blockchains including ETH1.x, ETH2.0, Bitcoin, Tezos, and Polkadot (parachain) belong to Layer1, and Layer1 efficiency has performance limits.

So, what categories does Layer 2 include? What is the idea of ​​solving the problem? What items does Layer 2 include?

1.Layer 2 overview

Layer 2 is essentially a collective name for a category of expansion solutions, including state channels, side chains, Plasma, and Rollup.

First look at the state channel.

State channels are one of the earliest widely discussed expansion solutions. They allow participants to exchange transactions off-chain multiple times, and only submit two things to the base layer.

Although payment channels have the potential of thousands of transactions per second, they also have some disadvantages. They do not provide public participation-participants must be known in advance, and users must lock funds in a multi-signature contract. Most importantly, this expansion solution is specific to applications and cannot be applied to expand general smart contracts.

Raiden is one of the main projects using state channels on Ethereum. In addition, the concept of payment channels is also widely used by the Bitcoin-based Lightning Network.

Next, let's look at the side chain.

The side chain is an independent block chain compatible with the ether. It has its own consistent model and block parameters. By using the same Ethereum virtual machine, the interoperability between the sidechain and Ethereum is possible, so the contract deployed to the Ethereum base layer can be directly deployed to the sidechain. xDai is an example of such a side chain.

Then look at Plasma.

Plasma is a Layer 2 expansion solution, originally proposed by Joseph Poon and Vitalik Buterin. This is a framework for building scalable applications on Ethereum. Plasma uses smart contracts and Merkle trees to create an unlimited number of child chains-copies of the parent Ethereum blockchain.

Plasma can offload transactions from the main chain to sub-chains and allows fast and cheap transactions. One disadvantage of Plasma is that users have to wait a long time to withdraw funds from the second layer. This is similar to state channels, the Plasma body cannot be used to expand the scale of general smart contracts. The OMG network is built on their own implementation of the Plasma chain, called MoreViable Plasma. The Matic network is another example of a revised platform using the Plasma framework.

In general, the first three types of Layer 2 solutions have basically faded. On the one hand, they belong to early technology, and on the other hand, there are problems of one kind or another in function.

For example, the state channel needs to lock the corresponding tokens, the side chain fails to solve the exit cycle problem, and Plasma requires real-time monitoring of participants, which is severely restricted. In addition, although Plasma and state channels can scale millions of transactions per second, they are not compatible with DeFi's smart contracts. Therefore, in the context that DeFi has long become the moat of Ethereum, Plasma and state channels obviously cannot meet real needs.

Finally, the most important thing is the Layer 2 solution, Rollup, which is considered to be able to solve ETH performance problems.

Rollup was originally proposed by V God in 2014 and was called "Shadow Chain" at the time. The failure of Layer 2 solutions such as Plasma and state channels has caused developers to re-emphasize Shadow Chain, which we now call Rollup.

Rollup is built on the basis of "Shadow Chain" to achieve data availability by executing the state off-chain and using only the Ethereum blockchain.

Rollup can be divided into two types, namely Optimistic Rollup and ZK Rollup. The validity of Optimistic Rollup is guaranteed by fraud proofs and synchronization assumptions, and the validity of ZK Rollup is guaranteed by zero-knowledge proofs.

These two types of Rollup have become the main force of Ethereum Layer 2.

2.Optimistic Rollup and ZK Rollup

First look at Optimistic Rollup.

Optimistic Rollup was proposed by Consensys researcher John Adler at the Ethereum Foundation Research Forum in July 2019. Currently, the teams dedicated to Optimistic Rollup include Optimism (formerly Plasma Group), Fuel Labs, Arbitrum, etc.

From a technical perspective, Optimistic Rollup is the integration of the Ethereum Virtual Machine (EVM). Optimistic means “optimistic”. Optimistic Rollup predicts the state of Layer 1 based on the data of Layer 2. Optimistic Rollup's blockchain tends to believe that nodes will not do evil.

The operating principle of Optimistic Rollup is like this. On Layer 2, the user runs a machine (OVM) to process transactions and smart contracts. All daily operations are performed in the Layer 2 machine; on the Ethereum Layer 1 chain , The user has the same OVM machine, and when an emergency occurs, the OVM machine on the Layer 1 chain will run.

If someone believes that a certain Layer 2 OVM operation is fraudulent, he can rerun the operation on the OVM computer running on Layer 1 to prove the authenticity of the operation.

Optimistic Rollup can support simple payments and complex smart contracts. Most applications of the existing code base can be easily ported to Optimistic Rollup, so Optimistic Rollup is regarded as a direct solution.

Then look at ZK Rollup.

ZK Rollup was originally proposed in 2018 by Barry WhiteHat, a senior researcher at the Ethereum Foundation, and its security is almost the same as Layer 1 (Ethereum). It can produce blocks in one minute and increase the throughput to 2,000 tps. Projects implemented by ZK Rollup include Matter Labs and Starkware.

The characteristic of ZK Rollup is that it replaces fraud challenges with zero-knowledge proofs, and the confirmation time is faster. There is no need to wait two weeks to complete the final determination of a block in the shadow chain like Optimistic Rollup.

ZK Rollup brings the possibility to greatly improve the performance of Ethereum.

Taking the introduction of ZK Rollup in DEX as an example, using ZK-Rollup technology to implement the exchange logic of the traditional decentralized exchange on Layer 2, so that all exchanges can be completed on Layer 2, which reduces user transaction costs while ensuring This improves the user’s overall trading experience. Compared with traditional DEX, DEX based on ZK Rollup has the following advantages:

First, almost zero Gas fees can be achieved, and all token exchanges take place on Layer 2. Second, it brings higher TPS (Transation Per Second) to DEX, which is hovering around 15 compared to traditional Ethereum, based on ZK The TPS of Rollup's DEX can theoretically reach the order of 3000; finally, to ensure that transactions are performed in real time, since all transactions are migrated to Layer 2, users no longer need to wait for the confirmation time of a block, and real-time transactions can be realized.

So, Optimistic Rollup or ZK Rollup, which one do users prefer?

According to feedback, liquidity providers of DeFi applications will prefer ZKR-Uniswap (Uniswap built on ZK Rollup) to OR-Uniswap (Uniswap built on Optimistic Rollup) because the former is more capital efficient.

If you want to improve the capital efficiency of Optimistic Rollup, you need to shorten its challenge period (Dispute Time Delay, DTD), or shorten the time for redemption of funds from Optimistic Rollup, and at the same time reduce the launch of "fraud +, review" on Layer 1. "The cost of the attack.

So, does Rollup have some hard to solve problems?

3. Rollup's "mutilation"

In general, Rollup has great potential for Ethereum, but it is still facing many challenges.

The most prominent problem is the composability between different DeFi applications based on Rollup. Simply put, if there are different DeFi applications on different Rollup chains, the information exchange between different Rollup chains will be better than that of the Ethereum main chain Information exchange on the Internet is more difficult.

In other words, there is currently more than one Rollup-based blockchain, and each Rollup blockchain can run its own applications, or different applications use different Rollup technologies. Once two different DeFi applications are based on different Rollup , The communication between the two will become extremely difficult.

This is the problem Rollup is facing. As the saying goes, it is difficult to sing alone. In order to maintain the composability of DeFi applications, DeFi servers will have to coordinate on a specific Rollup chain.

In addition, there are certain thresholds for developer migration. From the developer's perspective, migrating code to lLayer 2 will inevitably involve corresponding code changes, and will also incur certain audit maintenance costs, which will reduce the developer's willingness to migrate to a certain extent.