Scaling Ethereum: Magpie’s Expedition to New Heights.
Ethereum has more liquidity and daily volume than the rest of DeFi combined, but when compared to newer blockchain technologies, it’s slower and costs more to use, so it makes sense why users are flocking to new solutions.
As the popularity of Ethereum shot to the moon over the past couple of years, it really showcased some of the inadequacies of the chain, mainly being cost and transaction time. In just a matter of months, swaps went from costing users $1–2 to $80–150, and if someone beat you out on gas, it was possible you had to pay a portion of that and the transaction would still fail.
While it’s not that expensive right now, if network activity gets up to the same levels again, prices will rise once again, so we need scaling solutions if we want crypto to continue its growth.
Today we’re going to talk about some of these scaling solutions, what that means and why it matters. Everybody is a busy bird and it’s the weekend, so we’ll keep it brief.
Ethereum Scaling: What and Why?
If you’re looking to be the future of finance and DeFi, you have to be able to scale with user growth. So what is it? To keep it brief, scaling Ethereum is the goal of increasing transaction speed and throughput (transactions per second), but without sacrificing the inherent security of the Ethereum chain. Layer 2 scalable solutions help solve these issues by taking transactions off-chain, reducing network congestion and transaction time.
Why does it matter? Consider this: back in the middle of 2021 at the height of the bull run, you paid $25 for a failed transaction after waiting a few minutes and now the price of the token you want has changed and if you still want to buy or sell the token, you’re going to have to pay another $100 to complete the transaction.
It’s hard to get people into crypto when it costs them almost nothing to transfer money to their friends or buy something online but you tell them about this awesome token they should buy on Ethereum but they’re going to pay over $200 just to get money onto the chain, approve tokens, and swap for it, on top of everything else required. No one is going to want to use it.
How is Ethereum going to reach mass adoption if only a relatively few number of users can even afford to transact on the chain during bull markets? That’s why a solution to scale with user growth, for faster and cheaper transactions, is needed.
So how is crypto solving this problem?
One of the great things about crypto is that no one is ever satisfied with the current systems and both developers and users are always looking at ways to improve it. After all, we all want this to be the future, so we need to make sure everyone can use it.
There are a few quite popular solutions at this time so we’re going to cover them: rollups, both zero-knowledge and optimistic, and STARKs.
Zero-Knowledge rollups:
ZK rollups are off-chain protocols that operate on top of the Ethereum chain in order to help increase transaction speed and reduce cost, processing thousands of transactions in the same amount of time Ethereum would normally only be able to complete around fifteen.
Essentially, what they do is “roll-up” a bunch of transactions into one single batch on an off-chain virtual machine that executes the transactions and after, they then send a summary of these state changes to the on-chain contract that is on Ethereum, where the produced validity proof guarantees with cryptographic certainty the correctness of the off-chain transactions before changing the state of the Ethereum chain. Once verified, there are no delays in moving funds from a zk-rollup to Ethereum, as it executes on the main chain and has been verified to be accurate.
Optimistic Rollups:
Optimistic rollups are actually similar to zero-knowledge in a lot of ways. They both move computation and state storage off-chain, bundling transactions together before submitting them to Ethereum. This enables the ability to spread gas fees between hundreds or thousands of transactions instead of just one, decreasing the cost to users immensely.
How do they differ from zk-rollups then? Well, they’re not called optimistic for no reason. The main difference is that optimistic rollups assume off-chain transactions are valid and do not publish any proofs of validity. Instead, there is a time period after each submission to the main chain where anyone can challenge their validity by computing a fraud proof, penalizing any sequencer that included an incorrect transaction.
STARKs:
Or Scalable, Transparent ARgument of Knowledge are a proof system and a new way to scale Ethereum. While you can go in-depth for days about this new technology, we’re not going to do that here.
Similar to the above, STARKs are an off-chain solution that batches transactions together, processes them together, generates a proof, and then verifies that proof on Ethereum in one single transaction. Able to batch together upwards of 500,000 transactions per proof and splitting the gas between them, you can see how the cost would be substantially reduced in comparison to normal gas fees.
Are they any examples of these types of solutions you can try?
As a matter of fact there are, and some of them are actually in the top 5 in terms of blockchain usage in terms of value locked and DEX volume.
Arbitrum & Optimism are a couple of examples of optimistic rollups. Built on top of Ethereum, they provide a much faster & cheaper way to transact within DeFi. Currently both in the top 10 for total value locked and the top 5 for daily DEX volume, having only been around for about a year now, we’d say this goes to show that users are looking for layer 2 solutions and have begun flocking to them en masse.
zkSync 2.0 just launched on mainnet a couple of weeks ago. A new layer 2 & 3 zk-rollup solution that is offering from 10x to infinitely scaling lower gas prices, ease-of-use, security, and scaling. zkSync will be the largest layer 2 crypto launch of all time when its full Alpha launch happens, supporting the largest players in the game in DeFi and over 150 projects, it’s going to be massive, and Magpie will be joining them! 🥳
StarkNet is a great example of what is to come with the STARK technology and is another zk-rollup solution. Currently still in Alpha, things are going well with smart contracts, communication with Ethereum chain, full layer 1 security through using Ethereum’s on-chain data, and a bridge to move assets.
So what does this mean for Magpie?
Well, as we can see, tons and tons of exciting things are being built, and interoperability between different Layer 2 solutions and tech will be at an all time high, and increase as time goes on.
This means that Magpie’s role in this ecosystem will be even more important, helping users fly through crypto with ease. With more being added to crypto each day, the barrier to entry grows for new users and it doesn’t get easier for experienced ones either.
At Magpie, we intend to integrate everything we possibly can to enable seamless interaction across different Layer 2 solutions and we’re committed to creating an interoperable and seamless cross-chain and cross-layer experience in the EVM (Ethereum Virtual Machine) world for all of our users.
Speaking of, work has already begun on integrating zkSync, Arbitrum, & Optimism, so be on the lookout for those in the future!
