Scalability has emerged as a pivotal challenge to handle a growing volume of transactions and data efficiently. Ethereum has faced significant scalability challenges that primarily manifest in network congestion. During periods of high demand, users experience slower transaction processing times and are required to pay higher gas fees to prioritize their transactions. This not only degrades the user experience but also limits the practical utility of the Ethereum network for high-volume applications. It poses a substantial barrier to the broader adoption of blockchain technology. For sectors that rely on high transaction volumes, such as DeFi and NFT marketplaces, scalability is not just a feature but a necessity.
This backdrop sets the stage for the emergence and necessity of Layer 2 (L2) solutions. L2 solutions are designed to operate on top of existing blockchain networks, like Ethereum, to enhance their scalability. By handling transactions off the main chain and subsequently settling them on the main chain, these solutions aim to alleviate congestion, reduce transaction fees, and improve processing times, all while leveraging the underlying security of the main blockchain.
Among the various L2 solutions, platforms like Optimism, Arbitrum, and Polygon have proposed unique approaches to scalability. Each offers a different mechanism for off-chain transaction processing, with the shared goal of enhancing the overall efficiency of the Ethereum network.
Solutions like Eclipse and Polaris X Rollkit are pushing the boundaries further, aiming to leverage the strengths of each for improved scalability and interoperability.
Rollup leveraging Solana low fees and Parallel execution, Cosmos IBC Composability, and Ethereum Security.
Eclipse: A Hybrid Approach
Eclipse represents a groundbreaking approach in the L2 landscape. It uniquely integrates features from Solana, Cosmos, and Ethereum, each contributing a vital component to its architecture. By leveraging Solana's low fees and parallel execution capabilities, Eclipse addresses one of the most significant pain points in blockchain transactions - cost and speed. Parallel execution, in particular, offers a pathway to handle a higher volume of transactions simultaneously, a critical factor in scalability.
The incorporation of Cosmos' Inter-Blockchain Communication (IBC) protocol brings in the element of composability, allowing Eclipse to facilitate seamless interactions between different blockchain networks. This feature is crucial in creating a more interconnected and efficient blockchain ecosystem.
Ethereum's robust security model underpins Eclipse, ensuring that while scalability and interoperability are enhanced, the network remains secure and resilient against attacks. This triad of features positions Eclipse as a versatile and powerful L2 solution, capable of addressing the multifaceted challenges of blockchain scalability.
Furthermore, Eclipse's integration with Modular Cloud for indexing new chains, including EVM and SVM data, showcases its commitment to versatility and accessibility. The block explorer and API functionalities provided by Eclipse offer developers and users alike comprehensive tools to interact with and leverage the blockchain data effectively.
Polaris X Rollkit on Celestia
Polaris X Rollkit introduces an innovative approach to scalability by running on Celestia, a modular blockchain framework. This setup allows Polaris X Rollkit to leverage Celestia's strengths in data availability and consensus mechanisms, focusing on scalability and flexibility.
The 'ooga booga' smart contract portal, a feature of Polaris X Rollkit, stands out as a testament to the platform's commitment to innovation. This portal offers a testing ground and a launchpad for novel smart contract applications, potentially accelerating the development and deployment of scalable blockchain solutions. It represents a step forward in simplifying and streamlining the process of smart contract deployment, a critical factor in fostering a vibrant and dynamic blockchain ecosystem.
Revised Cost Analysis
The ApeCoin proposal by @0xPolygonLabs provides a valuable benchmark for estimating the financial requirements of deploying a Layer 2 (L2) solution, particularly in the context of a fine art and photography marketplace. This case study can guide ikigAI Labs XYZ in understanding the potential costs and funding needed to develop a similar L2 platform.
The ApeCoin proposal outlines an annual cost of approximately $200,000 for deployment and maintenance of an ApeChain L2. For a fine art and photography marketplace, this cost can serve as a baseline. Additional costs will include customization for handling high-resolution images, secure transactions of high-value assets, and integration with existing systems.
Revenue Streams
Similar to the ApeCoin model, revenue for the fine art and photography L2 marketplace could come from transaction fees (gas fees) and potentially from validator fees if the platform uses a consensus mechanism that rewards validators. The fee structure would need to be carefully balanced to ensure affordability for users while sustaining the operational costs of the platform.
Already Too Many L2s
The burgeoning array of L2 platforms is not a sign of excess but rather an embodiment of Ethereum's "App Store moment" - a pivotal phase where innovation, diversity, and free-market dynamics converge to shape the future of Ethereum's blockchain infrastructure. Much like the diverse array of applications in an App Store, each L2 network brings its unique vision and technical approach to enhancing Ethereum. The criticism of having "too many" L2s misses the point that this is a natural and healthy manifestation of a free market at work. In this competitive landscape, the best solutions are likely to rise to the top, while less effective ones will naturally fall away. This process is not just about survival but evolution - where successful ideas and technologies can eventually integrate into Ethereum's base layer, continuously refining and strengthening the overall blockchain ecosystem.
It's a period of experimentation and discovery that holds the promise of finding the most efficient, secure, and user-friendly ways to scale Ethereum.
Costprice
Here is what rollups spent on posting data to Ethereum in November 2023.
1. Arbitrum - $4.4M
2. Linea - $3.7M
3. Optimism - $2.508M
4. zkSync Era - $2.506M
5. Scroll - $1.43M
6. Base - $1.34M
7. Polygon zkEVM - $678k
8. Starknet - $500k
9. Zora - $211k
10. Aevo - $109k
11. Orderly - $101.2k
12. zkSync Lite - $101k
13. Public Goods Network - $95k
14. Mode - $31k
15. Lyra - $17k
The rollups we have revenue data for made more than enough to cover their costs. Their gas fee systems are designed to cover the L1 cost + add a premium. In November, revenue from gas fees was:
Arbitrum - $5.94M
zkSync Era - $5.48M
Optimism - $3.09M
Base - $1.6M