All blockchains face the same problems during development, namely decentralization, security, and scalability. Each blockchain can only solve 2 of these 3. In Ethereum, it is decentralized and secure, but lacks scalability.
Whether you have participated in Ethereum’s on-chain interaction or not, you may have heard the term Gas fee. Gas fee is essentially the fee you pay when executing the transaction. This fee is to compensate for the computational energy that your transaction needs to use. Currently, the Ethereum network has a limit of 15 transactions per second (TPS), which is far from enough considering the needs of using Ethereum and its booming Dapp ecosystem. This situation will essentially cause a bottleneck, that is, the network is blocked by transactions, resulting in a soaring gas fee. Everyone is fighting for their transactions to be verified and executed first, and some people are even willing to pay a higher gas fee than others to ensure that the transaction is completed quickly. Essentially means that the need to include transactions in a block exceeds the space of the block itself, and the result will be a soaring gas fee.
This raises the question, is it possible to use Ethereum only if you have a lot of funds? This is obviously not the original goal of Ethereum, it aims to provide unprecedented financial channels for everyone in the world. It wants a level playing field, not a “playground for the rich.” Therefore, Ethereum urgently needs to scale solutions.
Solving the scalability problem of the Ethereum base layer (layer 1) means that Ethereum must increase its block limit to increase TPS. The result of this will be that the hardware required to become a miner/node will be very expensive (ie Set up nodes), and eventually Ethereum will become more and more centralized.
Therefore, the current Ethereum community believes that the best way to expand the Ethereum blockchain is to extend the solution through Layer 2. There are three broad categories of technology for the layer 2 scaling solution: Plasma, State Channel, and Rollups.
If you don’t know what layer 2 means, then you can understand it this way. Layer 1 is the original main blockchain (Ethereum), where users of Ethereum reach consensus and build various applications. When layer 1 is congested, you can have a smart contract to connect to the “layer 2” outside the main chain, where transactions can be processed, and then back to the main chain that can be verified. The second layer is an additional blockchain, which is more efficient and lower cost than the Ethereum mainnet itself. Think of the second layer as a sub-city of the first layer (Ethereum main network), which more or less assists the operation under the control of the first layer.
Rollup is a very smart scaling solution: it essentially transfers the calculation process from the main chain to a separate chain called the “Rollup chain”. The “Rollup chain” is essentially an independent blockchain. On these “Rollup chains”, after transactions are executed, data is aggregated and aggregated, and then transmitted to the main chain for verification. Therefore, this technology is called Rollup (rollup). The calculation process is performed off-chain, and the data that will be placed in the Ethereum main chain block is also reduced, both of which can reduce Ethereum’s network congestion.
For Rollup technology to be implemented, this process must have an “intermediary”-a smart contract that connects the “Rollup chain” to the main chain. The main function of the smart contract is to facilitate transfer and verify that everything that happens on the “Rollup chain” is carried out in accordance with the rules. The advantage of this Rollup technology is that it can increase the TPS of Ethereum from 15 TPS to 1000 TPS, while reducing the gas fee per transaction from 45,00 GAS to approximately 300 GAS.
Members and developers of the Ethereum community have had a lot of discussions and debates on Rollup technology. The controversy stems from two possible Rollup technologies: Optimistic Rollups and ZK-Rollups (zero-knowledge summary).
Optimistic Rollups use a technology called “Fraud Proof”. Simply put, Optimistic Rollups do not perform any calculations, because they only run simultaneously with the Ethereum main chain, and after the transaction is executed and batched, they just transfer the data Publish to the main chain and assume that it is correct, so it is called Optimistic.
The obvious question is, how can Optimistic prove that the data is correct? This is actually where the “fraud proof” comes in. Optimistic Rollups has a mechanism called “Dispute Resolution System”. If someone sends an invalid or fraudulent transaction from the Rollup chain to the main chain, the system will capture and punish that person. The party who wants to submit this batch of transactions to the main chain must also provide a margin to do so. This security deposit is usually in units of $ETH. If other parties in the Rollup network discover invalid or fraudulent transactions, they can submit a fraud proof. By submitting this fraud proof, the transaction will run again, but this time on the Ethereum main chain. If it is found to be fraudulent, the deposit of the submitter of the transaction will be reduced and the person will lose their funds. To prevent malicious behavior.
It should be noted that the “dispute resolution system” is two-way, and even the party who submits the “fraud certificate” must submit a deposit. If the transaction is verified to be fraudulent, they will also lose the deposit. This ensures that the network is not overloaded by multiple unnecessary fraud proofs.
Currently Optimistic Rollups has two main protocols in use, Optimism and Arbitrum. Both of these were launched on the Ethereum mainnet in different ways and achieved varying degrees of performance.
The main problem with Optimistic Rollups is time. Before verifying transactions on the main chain, there must be sufficient time to send fraud proofs and verify that there are no fraudulent transactions in the batch. Therefore, suppose you submit a token exchange transaction in the Optimistic Rollup chain, you will have to wait for the batch of this exchange to pass the dispute resolution system. If a fraudulent transaction is involved, it has to be resolved before the transaction can be verified. This process may take several days, sometimes 2 weeks, which means you may have to wait a long time to execute the transaction.
Therefore, a more complex Rollup technology emerged, called ZK-Rollups.
ZK-rollups uses a technical point called “ZK Proof”. It works by performing calculations and data storage processes outside the main chain, and sending batches to layer 1, where they will be immediately verified or rejected. To put it simply, treat the data that needs to be verified as a “secret message” and the ZK proof as a tool that allows you to prove the “secret message” without revealing what the “secret message” is (so it is also Become zero knowledge). It is a way to prove that you know certain “secret information” without revealing it, and it also further reduces the data sent to the main chain. This zero-knowledge proof system allows instant verification or rejection of transactions.
This technology is extremely complex and a very important technology, so most of the Ethereum community members hope that it will become a long-term solution to the Ethereum expansion problem. It solves the transaction time problem of Optimistic Rollups and also solves the gas fee problem, and the technical design makes it impossible for any party to submit fraudulent or malicious transactions.
However, ZK-Rollups also has disadvantages. Although it seems to be a better solution compared to Optimistic Rollups, it is not compatible with EVM. Incompatibility with EVM means that existing applications on the Ethereum main chain will not be able to easily move to the Rollup chain. Existing applications that want to migrate to the Rollup chain will have to rewrite their code. Recognizing such a major issue, the ZK-sync development team is currently developing a Rollup chain compatible with EVM. If they succeed, ZK-rollups will truly become the “rules of the rich game” changer of the current Ethereum mainnet.
There are many projects that use ZK-rollups in different ways, such as Loopring, Hermez, ZK tube, Aztec, Starkware, and ZK-sync. They are all excellent and very innovative.
At present, the Ethereum ecosystem has hundreds of DeFi protocols, all of which are widely used by users of the Ethereum mainnet. Therefore, you can imagine the scenario when Rollup technology is implemented, which opens up the DeFi world of Ethereum for almost anyone with the Internet. In addition, the reduction of low gas fees and transaction time will itself lead to more new projects that rely on “low fees and fast transactions” to be created. Therefore, not only will thousands of new users be able to easily use Ethereum, but also thousands of developers will join Ethereum.
It is worth noting that Ethereum can actually become the first blockchain to solve the blockchain trilemma. The next major upgrade of Ethereum is the merger, which is to merge the consensus layer (beacon chain, formerly known as “ETH2”) with the execution layer (the current Ethereum chain, formerly known as “ETH1”). There is only one Ethereum blockchain. After the merger, the next major upgrade will be the data sharding of the consensus layer, which actually accelerates Rollups.
So, in short, the Ethereum roadmap is centered on Rollups and aims to accelerate and enhance Rollups.