Why Rollups make Ethereum cheap and easy to use?

Author: Ekin Genç

Source: decrypt.co

Summary:

Author: Ekin Genç

Source: decrypt.co

Summary:

Rollups may help solve Ethereum’s scalability issues before the arrival of ETH2.0 and its sharding.

Industry experts say Rollup is highly efficient, but requires trust in others tasked with monitoring to make it work.

The Ethereum blockchain has had "scalability" issues for years. Under the weight of its own success, the network is now growing at a rate of 15 transactions per second, while a single transaction can cost more than $20.

This bottleneck hinders the growth of the network and gives developers a reason to look elsewhere. Competitors like Polkadot and Avalanche already serve thousands of transactions per second with negligible transaction fees. If a faster opponent absorbs all the talent, Ethereum and ETH will gradually be eclipsed.

That’s what ethereum creator Vitalik Buterin gushed to his audience on The Tim Ferriss Show last week when he mentioned “powerful scaling solutions.”

Buterin says it can speed up transactions by 100 times. According to Eric Wall, chief investment officer of crypto hedge fund Arcane Assets, Rollup can achieve a transaction processing speed of 2000-3000 times per second.

However, this work has its own baggage. Ethereum experts say that while Rollups are highly effective, they will also move the network away from true decentralization.

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Rollups: How do they work?https://vitalik.ca/general/2021/01/05/Rollup.html）

Rollup solves the scalability problem by processing transactions outside the Ethereum blockchain, minimizing its congestion by reducing the load on Ethereum.

(If you need to understand Rollup technology, you can check the "Incomplete Rollups Guide" released by V God:

This is the so-called "Layer 2" technology: transactions are packaged on the sidechain and then put back on the main blockchain, called "Layer 1" or simply "base layer".

For those familiar with Bitcoin, these layers are like the difference between the Bitcoin blockchain and the Lightning Network, a second-layer payment network that operates outside of the Bitcoin blockchain.

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double edged sword

Rollup offloads Ethereum by reassigning some of the responsibility for processing transactions to another chain.

Therefore, for Rollup to work properly, someone needs to monitor which transactions are being packed and share this information with the network.

“In the worst case, you need some data to prove what you have in the rollup to the main chain (merkelized proof),” Eric Wall said, “so that you can exit them safely.”

If no one shares this information, users will have to handle the whole packaging business themselves. And handling the whole thing yourself can become a daunting task. This may take weeks or months.

Wall explained that some designs, known as "Optimistic" Rollups, can cause an attack loss on your ETH if things are screwed up. But in other "ZK" (zero-knowledge) Rollups, the risk is slightly less, although users still face the risk of funds being unusable for a long time.

“It’s always been like this in blockchain,” Wall said, “someone with coding knowledge can always tell if a system is secure.”

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take off

Rollups have been more successful than many developers and users expected.

Synthetix, a synthetic derivatives platform that uses Rollups, currently has $2.28 billion in assets locked in smart contracts; Synthetix is ​​testing Rollups with the Optimism project. And dYdX, a decentralized exchange backed by the a16z (Andreessen Horowitz) fund, which handles $245 million in transaction volume, is also currently integrating Rollups.

"It will give other projects the confidence to make the switch, and the momentum could pick up," Ogilvie said.

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Scalability solution under ETH2.0: Sharding

Rollups are not the only solution.

Ethereum's upcoming PoS blockchain, ETH2.0, will implement another solution to the scalability problem. It's a technique called sharding, which breaks up large chunks of computational work into smaller pieces (called shards), making the network faster and cheaper to use, like cooking smaller pieces of food. Cuts of meat are faster than whole cuts of beef.

But sharding isn't coming anytime soon. After all, it is part of the whole ETH2.0 "upgrade series", and there is still a lot of work to be done.