Top 3 Best Ethereum Layer-2 Scaling Solutions: Optimistic Rollups, ZK-Rollups, and Sidechains

We all know how painfully expensive it is to transact in Ethereum.

$50 to post a single transaction; ridiculous, right?

Yet this is a head scratcher we all find ourselves in.

Gas Price Volatility

Over the past year, Gas has been tumultuous — an unprecedented situation and, for purists, a “good” problem to have.

Ethereum Gas fees rose to as high as $69 in early May 2021. That’s before Vitalik Buterin pulled the plug on SHIB and ended the nightmare of Dogecoin spin-offs clogging the network.

Regardless of the efforts put in place, including the unexpected block limit size increment to 15 million in June—a desperate and futile attempt to tame rising Gas fees, Ethereum will, time and time again, find itself bloated and snapping back to “self-protection.”

This protective mechanism will force Gas fees through the roof, temporarily slowing down NFTs and DeFi activities, forcing prices lower.

But here’s another deal: Ethereum, even with its low TPS, is activity dense and has infrastructural superiority even when compared to the so-called Ethereum killers.

Therefore, provided ETH prices climb higher towards $4k, even $10k and beyond — as ETH becomes ultra-sound money, the Ethereum network users have to contend with high Gas fees. Taking cues from history, the moment ETH climbs to $10k; Gas fees would be in the $100 range.

Reading from this, how then are Ethereum developers planning to address this Gas problem and infinitely scale the base layer using Layer-2 solutions?

Layer 2 Solutions

Using a proof-of-work consensus network limits any on-chain scaling attempts due to the distribution of nodes and the security that comes with it at the expense of TPS.

Back in October 2020, Buterin tweaked Ethereum’s roadmap to prioritize scaling through Layer-2. Acknowledging that Ethereum will proceed with the Beacon Chain and eventually transit to Eth2, scaling was an immediate concern to arrest Gas fees spoiling the user experience.

Buterin backs off-chain scaling solutions. Together with “Sharding” in Eth2—which isn’t canceled for those who doubt progress, all these off-chain, Layer-2 options would have a multiplicative effect on the overall TPS, cementing Ethereum position as the go-to DeFi, NFTs, Tokenization, and everything “smart contract-enabled” innovation.

Top-3 Ethereum Layer-2 Scaling Solutions

So, which are these best Layer-2 scaling solutions Vitalik has been talking about:

Optimistic Rollups

To keep you up to speed, Vitalik Buterin believes optimistic rollups—and all developers basing their solutions on this technique—stand a chance. In the co-founder’s view, this will be the panacea, resolving the high Gas fees if it finds widespread adoption.

As the name suggests, Optimistic Rollups “rolls up” transactions off-chain, bundling them all while concurrently relying on the security of Ethereum Layer-1. The bundling and regular publication of all updates on-chain means all transactions would also be available on-chain and verified by miners/validators.

The beauty of optimistic Rollups is that they support smart contracts. As such, DeFi dApps can launch from this Layer-2. Besides, the bundling of transactions off-chain relieves the base layer leading to low transaction fees— Gas, high throughput, and enhanced security.

The downside of optimistic Rollups is their trust in miners/validators forcing withdrawal times to be longer.

Leading projects implementing Optimistic Rollups are Arbitrum—which is live on mainnet, and Optimism—which is in Alpha and being tested.

Zero-Knowledge (ZK) Rollups

This option adopts the same Rollups approach but with a difference.

While all transactions are bundled off-chain and periodically confirmed off-chain, the solution doesn’t trust validators/miners. Instead of assuming that miners/validators will act honestly when confirming all off-chain transactions, ZK-Rollups uses mathematical proof for validity of data and for the latest states.

The veracity of data is through a mathematical proof derived from the ZK-SNARK. Based on this arrangement, therefore, this Layer-2 scaling option is more secure than Rollups. Besides, since all operations are trustless, there is little withdrawal time, enhanced security, low Gas fees—as expected, and higher throughput.

The only downside is the complexity of smart contract implementation of which the team is presently trying to introduce. By Q4 2021, the ZK Rollups development team plans to release the second iteration with EVM Compatibility.

Projects planning to use ZK Rollups include StarkEx by Starkware and ZK Sync by Matter Labs.

Sidechains

Sounds unfamiliar? If it does, then think Polygon or xDai.

Sidechains are as the name suggests, sidechains.

They exist in parallel with the base layer, have an independent consensus algorithm but are EVM-compatible with their block parameters. Accordingly, the option supports smart contracts allowing dApps to launch in a high throughput, low-fee environment secured by the sidechain nodes.

While broadly classified as Layer-2, Sidechains are technically not so, as mentioned above. Their existence, parallel to the mainnet and reliance on two-way bridges for compatibility, nonetheless makes them an efficient option for relieving Ethereum.

Conclusion

The above list is not exhaustive.

There are payment channels, plasma, and others, all forming a part of the whole—and not, by Ethereum’s assessment, individually possible to achieve the Eth2 of super-fast transaction finality.

This is why Ethereum developers encourage innovation and release of as many scaling options as possible.

Different projects will opt to adopt any as per their requirements, helping to improve transaction settlement speeds — finality, while helping keep down Gas.

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