Bankless: Why is Layer 2 the future?
Original source: Bankless
Original source: Bankless
Compilation of the original text: Overnight porridge, the way of Defi
What are the risks?
What are the risks?
Will ETH capture value?
Does Layer 2 need a native token?
How composable?
Could this all be failing?
There are a lot of things we need to unravel. On the topic of rollup, Layer 2 and the future of Ethereum, David Hoffman started a dialogue with Polynya.
Note: Polynya is an anonymous ethereum and crypto researcher who has published some of his best thoughts on Layer 2, zk rollup, and the Web3 world.
David Hoffman (DH): Besides Ethereum, what is your favorite L1 blockchain?
Polyna (P): L1 is uninteresting, with one notable exception - validity proofs like Mina's ZK-L1, but note that ZK-Rollups (ZKRs) would be even better!
In the long run, ZKR can obtain almost all the benefits of ZK-L1, while also inheriting the highest security, sustainability, and liquidity attributes, with greater flexibility to focus on building the best execution layer. Fortunately, ZK-L1 also has the easiest path to becoming a ZKR (if that's a better solution for a particular ZK-L1 project).
DH: What does a decentralized Layer 2 look like? What is true decentralization?
P：A decentralized Layer 2 refers to a rollup connected to L1 through a secure asset bridge. Even if the rollup fails completely (including funds in smart contracts), there is an escape mechanism for users to withdraw funds from L2 to L1.
Additionally, ordering and proofs are permissionless, which also means that failed rollups can be seamlessly recovered by the community. The upgradeability of the contract is also decentralized, at least through governance, and some key modules, such as the cross-chain bridge that holds funds, cannot be changed.
Ideally, we'd like to end up with completely immutable rollups. There should be easily accessible tools that allow people to access and exit rollups without requiring any trust assumptions (other than running L1 nodes). After all of this is done, rollup is actually as secure and decentralized as L1.
DH: Are all L2s safe to use?
P:image description
Arbitrum risk factors summarized by L2Beat
DH: What is the biggest risk of using L2?
P: Currently, many rollup projects have multi-signature upgradability.
Multi-signature signers could theoretically conspire to steal all funds in the rollup. Of course, multi-signature is different from multi-signature, such as how is the distribution? How transparent is it? Is there a timelock for the upgrade?
I actually think there are two risks here: 1) A Dr. Strangelove type situation where multiple people lose their minds and decide to create chaos over it. 2) A more likely scenario is that regulators order enough signers to shut down the rollup.
The second risk can be mitigated by widely distributed community multi-signatures around the world (zkSync does a good job of this). I believe being able to cancel the timelock for escalation would also work well.
Most rollups also have a centralized sequencer, so the biggest risk is that the rollup may go down, during which time it may be very difficult, expensive, or impossible to transact (depending on the rollup). But you can rest assured that your funds are not at risk.
The good news is that most Rollup teams are committed to the path of incremental decentralization, and I'm optimistic that by this time next year, many major Rollup risks will be negligible.
DH: For those L2s that don’t have tokens, do you think it’s necessary for them to launch their own native tokens to compete with competing L1s?
P: Yes, I feel the need to. Of course, we can indeed run a niche rollup without tokens, but community ownership seems to be a requirement for large-scale rollups.
DH: What does "Ethereum Alignment" mean to you? Why is it important? How do you evaluate the "Ethereum Alliance" approach of different L2s.
P: To me, that means pragmatism.
Ethereum has the highest security, liquidity, and network effects, and the most ambitious technology roadmap for scaling rollups. Centralizing the rollup on Ethereum makes a lot of sense, and the "Ethereum Alliance" certainly has a scope.
Many teams are ideologically aligned with Ethereum's values, which simply cannot be obtained elsewhere. Some teams may focus on Ethereum as that is where most of the liquidity and opportunity resides. But we will definitely see rollup forks on other networks.
DH: How do you think the L2 composability problem will be solved?
P：All rollups are fully composable.
You can have a fully composable super rollup (up to millions of TPS, if possible). Also, the scalability potential of rollup is necessarily higher than that of L1, so there is less room for fragmentation. Of course, just like L1, composability between rollups breaks. But even here, rollups offer very good interoperability possibilities, since they share a settlement layer. So you can have solutions like dAMM where multiple rollups can share liquidity, or DeFi Pooling schemes where multiple rollups can access L1 dApps.
Unlike L1, the bridge between rollups is also safe. passDankshardingBy design, zk rollup can interoperate with L1 synchronization. Finally, it is possible that eventually we can compose multiple zk rollups internally, so to L1 it appears as a single composable state with a single proof.
Of course, this is speculative, but the point is - rollup has a wider design space, which makes composability and fragmentation a much less of an issue than between L1.
DH: How does the L2 ecology of Ethereum make everyone feel more connected?
P：By abstracting all the complexity away from the user.
Users just use a smart contract wallet like Argent, they don't need to know what a rollup is. They just need to use the application of their choice, and all the blockchain stuff is seamlessly abstracted away in the background. Of course, this is a long-term vision that will take several years to realize.
And at this moment, we already have a very seamless bridge & DeFi pooling solution (attend Argent on zkSync).
DH: How will Ethereum L2 attract newcomers who are already using the replacement L1?
P：It's simple - rollup has higher scalability potential, functionality, programmability, and UX than any L1 in the long run.
The real game-changers will be the unique and innovative apps that weren't even possible on the L1. We saw on Twitter that @guiltygyoza has built a physics engine and 3D models on StarkNet. In the long run, users will use rollups because they are far superior to L1 in every way.
In the short term, however, developer adoption and token incentives may be effective.
DH: What do you think is the most achievable outcome for developers that could greatly improve the Ethereum ecosystem?
P：Not sure, I'm not a developer, I don't know what low hanging fruit is!
It's definitely not going to be easy to achieve, but I'm going to say the obvious: UX is horrible and broken. I think we need some standardization work (like more moves like logging in with Ethereum) so that the user experience will be more consistent.
DH: Are you concerned that the increase in block space capacity due to L2 will outweigh the increase in transaction demand?
P: Yes! Of course, the types of applications that exist today do not require volume rollup and data sharding.
Hopefully, with higher capacity and better functionality, we'll see new types of apps with a wider user base. But that's just something we can expect for now, we'll see!
DH: With only a few people understanding the future of the crypto industry, what is most important to its success?
P：Trust is a fundamental principle of our humanity - and most of us place a high value on trust.
Our goal should not be to be absolutely trustless, but to improve our trust system through fair competition.
DH: In your opinion, under what circumstances would Ethereum fail?
P：paradox:
1. Become less decentralized and ossify too quickly.
2. Something completely revolutionary comes along and knocks Ethereum out because Ethereum is ossified and too decentralized to respond quickly.
Also, it's worth noting that I believe the fortunes of the ETH asset and the Ethereum network may diverge. (Almost certainly will happen to BTC and the Bitcoin network.)
DH: Could a new general Data Availability (DA) project gain traction? If so, can they exploit these network effects and launch a settlement layer, stealing market share from Ethereum?
P：These are two different things. A general-purpose DA project will certainly gain traction, but this network effect is largely irrelevant to the conditions required by the settlement layer, namely high-quality currency, high economic security, broad token distribution, breadth and depth of liquidity and the Lindy effect.
Additionally, Ethereum is building its own highly scalable DA layer to complement its established settlement layer. Now, there may be certain isolated applications that don't care about any of the above, in which case I'd say it's targeting a different market than Ethereum.
DH: Can zkrollup be fully compatible with EVM?
P: Yes! The ConsenSys application development team already has detailed specifications.
zk-evm specification
The Ethereum Foundation (EF) is working with multiple teams and Polygon Hermez & Scroll are building an EVM equivalent of zk-rollup along very similar concepts. There is a growing consensus that a native zkEVM implementation is possible by the end of this year. However, they may take some time to mature and scale.
DH: How do you see the distribution of winners in the crypto space? Will the winner take the most cake? How much is "at most"? What is your reason for answering?
P: The obvious answer is that the winner gets the majority, or in other words an oligopoly. This is how technology has always worked, and there is stronger social consensus pressure in the crypto space. Oddly enough, I think we can have a long tail market due to the religious nature of crypto.
DH: You tweeted about value capture at different layers, do you think the fat protocol argument is invalid?
P: I added a caveat to the post: high quality assets. Also, it depends on the use case. If you can build high-quality assets, and the primary use case is DeFi, then the underlying asset generates a lot of value.
DH: Also, can you talk about the supply/demand situation for ETH in a fully rollup-centric environment? When do you expect this to stabilize?
P：ETH will be used as a currency throughout the ecosystem, and Rollup will pay transaction fees, and while each transaction is trivial, they add up to a large number.
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