A Quick Look at Blockchain Scaling via Rollups
Tweet your takeaways at @UrszulaSolarz!
The year 1989 opened the first age of the internet known as web1. In it, people gained the ability to view various types of media from one screen. Succeeding it was web2, the age where users themselves could upload content. Web3 is the latest age of the internet promoting the ability to prove ownership over online structures. This appeals to many people who eagerly reach for digital versions of physical entities, like cryptocurrencies and non-fungible tokens (NFTs).
With hundreds of thousands of daily participants, decentralized finance is definitely one of the more popular fields of web3. However, it faces powerful rivals in credit card companies like Visa who can process around 1,700 financial transactions per second. In stark contrast, the Ethereum blockchain which enables cryptocurrencies like the similarly named Ethereum or Tether can only do thirty transactions a second. This means that as more and more people use blockchain, there will be increasing competition to outbid other users and have your transaction processed first. Thus, the gas price or the cost to compute something on a blockchain will go up.
If we want to scale a blockchain to spread out how these transactions are computed and more evenly distribute costs, we can build a layer of chains on top of the original chain; this is called Layer 2 scaling. Since scaling is a complex and constantly developing field, this text will hopefully equip you with keywords to look into more concepts.
One of the most promising methods for scaling are rollups. They enable cryptocurrency exchanges by linking the side chains on the second layer to the main chain, so that only the final data from transactions run on side chains is recorded on the main chain. In other words, through the rollup process, various chunks of data are rolled into one submission (AKA a singular block entry) in the main chain.
There are two types of rollups: zero knowledge rollups and optimistic rollups.
Zero knowledge rollups get their name from zkSNARKs, or zero-knowledge succinct non-interactive arguments of knowledge. The name holds true since this rollup scaling solution doesn’t need to see all the chain’s transactions, nor interact with human validators to provide evidence that its submissions are valid. Instead, this type of rollup runs the transaction and then submits a proof of validity computed like proof of work to the main chain, thus showing that the singular entry into the main chain is secure.
[Images adapted from Finematics]
Optimistic rollups differ from zero knowledge rollups in that they generate fraud proofs, rather than validity proofs; more specifically, they are optimistic in that they hope all transactions are secure, so they only produce proofs in case of fraud. Since people are checking transactions on the blockchain (because it is open source software governed via public consensus) they can block a transaction from going through during a weeklong validation period. Zero-knowledge rollups are faster than optimistic rollups since they don’t have such a checking period, but are limited in the complexity of transactions they can enable.
During the 2022 Cornell Blockchain Conference in Roosevelt Island in NYC, many speakers mentioned the importance of not compromising security and decentralization when scaling up. Therefore, it’s a good idea to keep an eye on the development of cryptographic algorithms responsible for rollup proofs.
You can learn more about the future of Ethereum and Layer 2s by listening to Vitalik Butherin on Naval Ravikant’s podcast here: https://www.youtube.com/watch?v=g87ZSTomZDY.
For examples of projects using different rollups, check out this guide: https://limechain.tech/blog/optimistic-rollups-vs-zk-rollups/
Here is a scalability article with an emphasis on Bitcoin: https://towardsdatascience.com/the-blockchain-scalability-problem-the-race-for-visa-like-transaction-speed-5cce48f9d44
