Evaluating Which State of the Art Layer 2 Scaling Solution is Best for You
This article is part 3 of 3 in our blockchain scalability series. You can check out part 1 here and part 2 here.
Scaling blockchains to a global level is one of the biggest challenges in the space and a question that experts have spent years grappling with. Right now, it’s tough to scale blockchains to a very high level — as chains become loaded with transactions, users face problems like long waiting times and high transaction fees.
These problems are standing in the way of ordinary users really getting into the crypto space. If we want to make blockchain technology truly mainstream, we have to make it scalable.
Fortunately, there are many state-of-the-art solutions in the works to do just this. In this article, we’ll continue our deep dive into the current answers to the scalability question.
The Questions You Need to Ask
When designing a Layer 2 solution for blockchain scalability, there are two main questions you need to ask:
- Do you want to be able to verify the legitimacy of transactions through on-chain cryptographic proofs?
- Do you want to be able to store data on-chain?
In the rest of the article, we’ll explain these questions in more detail and explore how they relate to four main L2 solutions: Plasma, optimistic rollups, ZK rollups, and Validium.
Plasma
With Plasma, the answer to both of the above questions is “no”. Let’s dive into that.
Usually, when someone submits a transaction to the L2, the user deposits or logs their assets on the L2. Then, the operators of the L2 receive and process these transactions and submit the commitments to the L1.
Normally, the way this works is through public-private key pairs. This proves that you own the correct private key and verifies the transaction. On-chain cryptographic verification is a fast and simple way of verifying that these commitments are correct cryptographically. L2s exist to compress data, simplifying the data you commit to the L2.
Plasma, however, doesn’t use on-chain cryptographic verification. Instead, it uses cryptographic economic games to enforce the correctness of transactions. The decision is trusted by default.
How do we make sure transactions are safe without using cryptographic verification?
When Plasma operators submit commitments to the L2, users of the system can challenge the commitments and ask the operators to prove the legitimacy of the blocks during a “challenge period.” The operators then have to respond within a week.
This requires users to actively monitor the blockchain. However, there are rewards and economic incentives for users who watch the Plasma chain, making sure people are around to challenge bad blocks.
Plasma and on-chain data availability
The issue of on-chain data availability is where Plasma falls short.
Let’s take an example of where two operators are acting maliciously and not processing certain users’ transactions.
In this case, the only real recourse users have is to exit the L2 — known as a mass exit. This creates a new problem: how do users prove that they own assets on the L2? If they can’t do this, they’ll lose their assets when they leave, since there is no state of the L2 stored on the L1.
This proof of ownership is called witness data. At the time of exit, users need to be able to provide this witness data if they want to keep their assets — and that’s very difficult to do.
Optimistic Rollups
Optimistic rollups (OR) are similar to Plasma, but they use on-chain data availability (answering “No” and “Yes” to the two questions posed at the beginning of this article).
The main advantage of optimistic rollups is that it is built on top of the Ethereum base layer and is therefore compatible with the Ethereum Virtual Machine (EVM) and Solidity. This makes it very easy to build applications using an optimistic rollup L2 solution.
The main downside, again, is that there is no on-chain verification of state transitions, meaning operators can still publish bad information and there’s no reliable way to prevent this. Solutions involve complex economic games which have loopholes and require users to be constantly online.
This is where ZK rollups come in.
ZK RollUps
Zero-Knowledge (ZK) rollups use cryptographic verification to make state changes on-chain (answering “Yes” and “Yes” to the two questions posed at the beginning of this article).
To do this, they use zero-knowledge proofs to verify data. They also store all the relevant data on-chain, which allows servers to recreate the state of the L2 simply by looking at the Ethereum blockchain and transaction receipts.
In simpler terms, this means that anyone can do a decentralized reading of these chains — adding an impressive degree of transparency and anti-censorship qualities.
Unlike other L2 solutions, there’s no need for a challenge period around the state with ZK rollups. Once a transaction gets processed, it’s valid and set in stone.
So what’s the downside to ZK rollups? Right now, the main issue is speed — they’re not quite as lightning fast as other solutions. This is because it takes a lot of computation to generate zero-knowledge proofs, and they’re very expensive to verify on-chain.
Validium
Validium is the fourth scalability solution we’ll look at in this article. Validium basically takes the stance that it’s too expensive to store all this data on-chain, so while it uses on-chain cryptographic verification, it does not use on-chain data availability (answering “Yes” and “No” to the two questions posed at the beginning of this article).
On-chain cryptographic verification brings some really great properties — like finality within minutes as opposed to days and the knowledge that there will never be an incorrect state on-chain — but without the cost.
With Validium, you don’t store the data directly on-chain, but you do give users ways to punish the blockchain if they don’t publish the data. They do this via a committee of accounts that can decide to slash funds or punish the operators of the chain in some way, unless they publish the relevant data within a reasonable timeframe.
These four solutions all play differing roles in solving the scalability problem, and none of them is perfect. As time goes on, it’s likely that we’ll see further refinements of these methods, and perhaps see some brand new ones emerge.
To stay up-to-date with all things blockchain, crypto, and decentralization, tune into The Unstoppable Podcast, where we regularly explore topics like this in plain English.
